They Had $3.5M and a 98% Score — Here's the Catch.

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We made this couple's retirement plan better — and their Monte Carlo "success score" dropped from 95% to 88%. Here's why that's not a red flag. It's the entire point.

A high "retirement success score" feels reassuring. But that number only holds if everything goes exactly to plan: your investment returns, your timeline, future tax rates, how long you and your spouse live, and how much you spend each year. The one thing it can't account for is that life never goes exactly to plan — which, ironically, is the only thing we can truly count on.

Over three months and seven planning meetings, we rebuilt this couple's plan to be tax-smart and ready for real life — income, taxes, investments, healthcare, and estate planning. On paper, the score went down. In real life, the plan got far stronger. In this episode, Taylor breaks down what a Monte Carlo retirement score actually measures, why a better plan can score lower, and the three "what-ifs" the score quietly ignores: the surviving-spouse "widow's penalty," the hidden cost of never spending what you worked so hard to save, and the curveballs no spreadsheet predicts.

If you're 55–65 with most of your savings in tax-deferred accounts (401(k), IRA) and you want to retire with real confidence — not just a higher number on a dashboard — this one's for you. We'll get into tax diversification, Roth conversions, and why a balanced mix of taxable, tax-deferred, and tax-free money gives you options when life changes the plan.

0:00 – The review that dropped their retirement score (95% → 88%)
0:57 – Why a higher score can be a false sense of security
2:35 – The pre-tax trap: $3.5M, RMDs & a growing tax bill
3:47 – The fix: same money, reshaped into tax-free Roth
5:10 – Why tax-deferred money ties your hands (income tax + IRMAA)
6:05 – The widow's penalty: when the survivor pays double
6:58 – Why a Monte Carlo score is never actually "right"
8:08 – The road trip: Google Maps, a snowstorm & life's curveballs
9:23 – The trips and purchases you keep putting off
10:08 – Sudden costs: illness, chronic care & getting boxed in
10:53 – 95% to 88%, explained: trade-offs & Roth conversions
12:01 – The real question: not "will it last," but "how usable?"
13:00 – Run your own numbers + book a call

Resources:

Website:  https://www.demarsfinancial.com/

Phone: (509) 536-9556

Schedule an introduction call with Taylor: https://bit.ly/demarspodcast

Check out Taylor's YouTube Channel: https://www.youtube.com/@TaylorMadeRetirement

Taylor's Newsletter: https://demars-financial-group.kit.com/827c64fe0e

Disclaimer: Since we don't know your specific situation, none of this information should be construed as tax, legal, financial, insurance, financial advice, or other advice and may be outdated or inaccurate. It is your responsibility to verify all information yourself. This content is prepared for entertainment purposes only. If you need advice, please contact a qualified CPA, attorney, insurance agent, financial advisor, or the appropriate professional for the subject you would like help with. Demars Financial Group, LLC or its members cannot be held liable for any use or misuse of this content. Advisory services offered through Demars Financial Group LLC, a Registered Investment Advisor. Demars Financial Group is not affiliated with LPL Financial.

Transcript

SPEAKER_00 0:00

Today's content is pulled from Taylor's YouTube channel. If you want to watch the video version or catch more great content, subscribe by clicking the link in today's show description. Welcome to Taylor Made Retirement, where we explore what it takes to build a retirement that works for your money and your life. With third generation certified financial planner Taylor DeMars.

SPEAKER_01 0:28

I just got out of a client review, and there's something you need to see that most people mess up completely when it comes to the retirement plan. You see, when people hire me, they are usually looking for answers for a few big questions. One of which is what pitfalls or mistakes do I need to make sure I'm avoiding so I don't torpedo my own retirement? And of course, we can't answer that off the cuff, so we take a three-month process in order to get them a personalized answer. We're covering income, taxes, investments, estate planning, and healthcare planning. We call it the retirement readiness roadmap. You'd think by the end of that process, their plan would look better and better on the surface. Well, let me show you this, which is their score, their Monte Carlo score, actually goes from a 95% you see here on the right to 88% on the left. And you might look at that and say, what a failure. What are they paying you for? Which might be a fair assessment if you're just judging a book by its cover. However, what this is not showing someone is what is under the hood, what actually is comprising of their plan when you start to dig into the numbers. Because sure, if you're doing a process like using bold and retirement planning software or hiring an advisor that's just trying to optimize all the financials and all the numbers to go up, you're going to be optimizing for the wrong thing, in my opinion. Now, don't get me wrong, the Monte Carlo score is important, but it's not the be-all end-all. I like to think of it more as a North Star or a temperature gauge, a rough feeling of whether the plan is in the hunt. So what I want to show you is how you should re actually be thinking about the Monte Carlo score and what you should be optimizing for instead. Now let me say first of all, I'm not just ignoring the Monte Carlo score. Again, it's an important factor to the whole plan. And in fact, when we build a plan for clients, we're targeting an 80% Monte Carlo score or probability of success. 80% tells us that in the vast majority of scenarios, someone is going to have not going to run out of money before they die, or as they like to say, not go broke before they croak. And that's just a warm, fuzzy feeling that most people have, and I would argue is a false sense of security. Because if you look at a plan, you might even think that 100% probability of success means a successful plan. Let me tell you why that's not the case. Because when we're building a plan for clients, we're trying to optimize around their life and their lifestyle, not just arbitrary numbers. So for example, under the surface is the tax plan. In this client scenario, they started with an overwhelmingly positive store score because it said, hey, they had worked hard, saved hard, have around $3.5 million saved today. And yeah, they should be able to have enough money to take care of the needs and wants in retirement. What that doesn't show is that most of their assets are locked up in pre-tax retirement accounts. Think your 401k, IRA, etc. And the problem with that is your hands are tied. So before we optimized their plan, by the numbers, they actually had had different milestones. At age 60, their $3.5 million five years from now would be $4.5 million in tax-deferred assets. At age 70, they would have $6.5 million in assets. And by age 75, when their required minimum distributions kick in, they're estimated to have $8.6 million in tax-deferred assets. You may look at that and say, Well, what are they whining about? They got millions of dollars. Well, I don't have to tell you if you're watching this that RMDs are a very scary picture at that point. Meaning they have hundreds and hundreds of thousands of dollars of obligatory income, whether they want to spend it or not, bumping up their tax brackets higher and higher. Again, you may say, hey, rich person problems, what do they have to cry about? Well, when you've worked and saved a lifetime to build a nest egg like this, it is a big deal to see a significant portion of your net worth, some might say lost to the IRS because you just simply didn't plan with a smarter strategy. So here's the contrast. By the end of this client's plan, by age 60, they had not the recall 4.5 million dollars in tax-deferred assets, but instead 3.8 million dollars. Okay, lower. Fast forward to age 70, instead of $6.5 million of assets, they've got $1.5 million in tax-deferred assets. And then fast forward to that RMD age, remember they had $8.6 million? Well, with the optimized plan, they actually don't even make it to $70 with any tax-deferred assets. So they're all in tax-free funds at that point. So you may be saying, well, what did they look like before with their tax-free assets? All along they had about $100,000 in tax-free assets. But here's the rub. With a tax optimized plan, again, not working a day longer or saving a dollar more, their plan transforms. And so by age 60, they've got a half million dollars of tax-free assets. Age 70, $3.5 million are tax-free. And by age 75, the RMD age, not only do they not have any RMDs to speak of, but they have nearly $6 million in tax-free Roth assets. So the plan isn't about changing how much money they had, it just changes the type of money they have. Now, this is important for a number of big reasons. Because you may say, hey, tax-deferred assets, a significant amount isn't the end of the world. And you're not wrong, but you have to keep in mind what this limits you in life. For example, it's still money you can use and withdraw, but every single dollar that comes out of that bucket is taxed at income rates, the same rates that you're paying wages, paying taxes on your wages today. And when you're in retirement, every single dollar feels that much more painful to take out. Not just because of income brackets on the federal level, but maybe you've likely got state income taxes. And on top of that, that's going to affect your Medicare costs. Think of Irma, income-related monthly adjustment amount. I use clients that without planning will be forecasted to spend thousands and thousands of dollars more per year because they have so much money locked up in the wrong places. And here's where it gets worse. You've probably heard of the widow's penalty, meaning that this client couple today, you know, have a plan that may be picture perfect, but heaven forbid something happens to them earlier in life. One of them passes away earlier. I mean it's inevitable, but significantly earlier in life, the tax bracket is not very favorable to someone who's filing single versus married. The tax brackets roughly drop in half. So even if I'll pick on the husband, if he dies early, the wife has to let roughly pay double in taxes just for living the same lifestyle. Now, with this tax optimized plan, she doesn't have to worry about that because she's able to say, I got millions of dollars of tax refunds. So what's the point of this? It's not just about being able to optimize for a Monte Carlo score, because at the end of the day, there's so much more under the hood that you need to be able to optimize for. Because one thing I can tell you about a Monte Carlo plan is that it's not right. It's not correct. Think about it. If I'm talking about a client couple today and they're both 55, we're planning for them to live until 90, maybe 95, that's a multi-decade horizon that we're assuming this whole plan works out for. That's what I mean by saying a Monte Carlo score is helpful as a gauge or a temperature gauge to know whether we're in the hunt. But it's a bit deceiving when you start to even break down the cash flows and says, hey, by your age 86, you're gonna be withdrawing this much from this account or even have this much in this account, those same numbers I cited earlier. It's I can all all but promise that those are gonna be incorrect. I like to think of it this way: if we're gonna plan a 30-year time horizon for retirement, think about where your life was 30 years ago. Could you have imagined that you would be living in the house you are, having the job that you are, the family structure you do today? Well, if you do, I want your crystal ball, but probably not, right? You probably had no idea where that time horizon would have gone, and I would argue it's the same way for a 30-year-plus time horizon for retirement. I like to joke that it's kind of like a long road trip. In fact, a road trip I took was when I moved up here to Spokane, Washington to work with dad. I moved from Orlando, Florida, and that was a long road trip. I we punched in the coordinates from Google Maps and it told us turn by turn how to get up here to Spokane. But what it didn't tell us is that there would be a significant roads, uh significant snowstorm that impacted us on day four of our road trip, making us stranded for an extra day there. That's on top of the road construction and the traffic jams that were along the way that you know Google Maps was there to say course correcting and recalibrating to get us on the right map. That's the same thing I feel in retirement. As Monte Carlo score is is deceiving to the point where you may feel it's like a warm and fuzzy outlook and you may take it and run, but it doesn't tell you how to react when the inevitable curveballs come at life. So, for example, I already mentioned one of them is the curveball of one spouse passing away early in life. Super unfortunate, but even more unfortunate if you're underprepared. So the Roth assets create a wealth of access and ability to be able to still take care of your needs, wants, and wishes, whether one or both of you is still around. Which leads me to the second thing that a tax optimized plan can do for you. You may want to be able to spend a large amount on a new car, or maybe taking the whole family on a bucket list trip. The list goes on, all those kind of want categories, but I can't tell you how many times I've had clients get to a point where they say, Hey, I'm gonna pull the trigger on a $10,000, $20,000, even $30,000 expense, and they pump the brakes and they say, you know what, maybe I'll do it next year, or uh, it doesn't feel right. And what they're not saying out loud is the tax cost is creating so much friction that keeps them from pulling the trigger. It's kind of sad. So people would delay the trip, they forego the wants that they had been saving a lifetime for, which is rather unfortunate in my opinion. The second thing that a tax optimized plan unlocks is being able to take care of those things that may be rather unfortunate in life. Not just a c a spouse passing, but a spouse getting sick. Not just a one-time illness, but maybe it's a chronic illness. These are expensive experiences that my clients go through, and having a tax-optimized plan creates the flexibility that they otherwise wouldn't be able to have. Because most clients who come to see us have the overwhelming majority of their assets in tax-deferred funds. Again, the 401k, the IRA, and so on, which makes sense. Most of your savings was probably in your highest income bracket years, so you got the best tax breaks. But what they don't realize is they've painted themselves into a corner that without a strategy that can be proactive about it, you're you're kind of out of luck. So going back to our Monte Carlo score at the beginning, we started with a 95% score and it shifted down to 88%. Now, that may look like it got worse on paper, but that's because we were making trade-offs. I like the saying from my my dad, which is there are no perfect options, there are only trade-offs in planning. And so the trade-off in this client's plan was to be able to say, well, rather than just letting our assets ride indefinitely, let's proactively take that tax haircut, conduct Roth conversions to be able to, again, proactively shuffle assets from the tax-deferred, most expensive bucket, to the tax-free one, and be able to see those assets then compound inside of a more optimized bubble. You might recall, as I showed you earlier in the video, their assets, ending assets, the projected ones, didn't differ by that much by the dollars. What you don't see until you look under the hood is the engine is vastly different. Would you rather have $12 million at your end of life that are all tax deferred or $12 million that are all Roth? Speaks for itself. So what I'm trying to get the message across is don't let the surface level statistics overwhelm you. Don't let them give you a false sense of security to be able to just look at the big round number and say, oh, it's gotten bigger and larger because it may not be optimizing for what matters most. In our opinion, we feel that looking at the portfolio is the third part to building a retirement strategy. First, you gotta analyze your purpose, figure out what it is, your needs, wants, wishes, ideal lifestyle that will then help you impact what the planning process looks like. Again, we build out a retirement readiness roadmap for clients to cover a comprehensive set of criteria to know, okay, what does their ideal lifestyle actually look like? Once you've done the port the purpose and built the plan, you can apply it to the portfolio and see impacts like I just showed you on our client scenario earlier. In short, you need to be asking yourself not just, hey, will my money last in retirement, but how usable will my money be, not if but when life changes? That's the crux of what I'm trying to get across today. So if this intrigues you and you're trying to figure out how to optimize your plan to not just make the numbers bigger for the sake of feeling better, but actually optimizing for what matters most, there's a link in the description or you can scan the QR code on screen to book a call with me. We'll be able to analyze your situation, suggest ideas of how we might be able to engage in working with each other, and talk about what an ideal relationship looks like from there. And if you're curious to start running your own numbers tonight, I put a link in the description so you can get free access to the same professional retirement planning software I use with my own clients. It doesn't have all the same bells and whistles because things can get rather complex, but it's definitely enough for you to get started. So if you're not ready to have a conversation yet, click the link in the description and apply for free access today.