We are a married couple, ages 60 (me) and 69 (my husband), with a net investment portfolio of approximately $9.8 million, consisting of traditional IRAs, worth $8.2 million, and a taxable brokerage account worth $1.6 million. 

My husband is retired and receives a traditional pension of $200,000 a year, Social Security benefits of $40,000 per year, and $90,000 a year from consulting for his former employer. The consulting work allows him to participate in the company's retirement plan.

I will definitely claim Social Security early. Why do so few people talk about the elephant in the room?

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Do I use $300,000 of my $1.2 million retirement savings so my daughter can attend her dream college?

I actively manage our investments and have generated strong returns over the years. My annual income is highly variable, ranging from zero to more than $500,000, and consists entirely of long-term capital gains.

Other relevant facts: We have excellent, low-cost private health insurance. We have no debt. We are currently paying $100,000 a year in college expenses, funded entirely from current cash flow. These expenses will end in 2028.

One significant gap in our financial picture is that we do not currently own a home. We would like to purchase one in our very high-cost, high-tax state. Given our circumstances, what would you recommend as the most tax-efficient way to fund a home purchase?

Specifically, is there ever a compelling case for withdrawing the entire amount needed for the purchase from traditional IRAs — accepting the associated tax bill — in order to buy the home outright, while simultaneously undertaking mega backdoor Roth strategies?

Our thinking is that our marginal tax rate is unlikely to be meaningfully lower than it was during our working years, given the pension, Social Security, consulting income and the size of our traditional IRA balances. We would rather pay taxes upfront than pay mortgage interest. 

First-World Problem

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Ultimately, you are gonna do what you are gonna do. 

While I feel like you have presented me with a fait accompli — you seem intent on taking the money for a property from your traditional IRA — it would be a mistake from a taxation/financial standpoint. You would end up paying a lot more for that house out of pocket, and lose money on the future market increases.

Your instinct that you'll never be in a meaningfully lower tax bracket isn't an unreasonable one, given your good fortune. In fact, many affluent retirees with very large traditional IRAs intentionally accelerate withdrawals or Roth conversions for that reason. They want to enjoy their money now. However, you have a $1.6 million brokerage account you can tap.

But let's say your house will cost $500,000, for the sake of simplicity. Taking a 6.6% 30-year mortgage would be the better choice than withdrawing $500,000 from a traditional IRA all at once. That lump-sum IRA withdrawal would be taxed as ordinary income, which would likely push the withdrawal into the highest federal tax brackets, and state tax brackets. 

Depending on your other income and where you live, the tax bill on a $500,000 withdrawal could easily be $150,000 to $220,000, or more. In contrast, a 6.6% mortgage charges interest only on the outstanding loan balance over time, while allowing your retirement savings to remain invested and, crucially, continue growing tax-deferred (until withdrawn).

Rather than triggering a supersize tax bill in a single year with one big withdrawal, you can spread withdrawals or Roth conversions over many years, potentially staying in lower tax brackets and reducing the total amount of tax you pay. You can also make extra mortgage payments when it makes sense or refinance if interest rates decline in the future.

If you had an unusually low-income year and can carefully manage your taxable income, or can spread withdrawals over several years instead of taking a single large distribution, dipping into your traditional IRA makes sense. Whether you buy a house or not, you should absolutely time your own withdrawals with your fluctuating income.

However, for most people, paying a 6.6% mortgage rate is less costly than incurring the substantial taxes associated with a $500,000 lump-sum IRA withdrawal. You could reach a middle ground by financing the home purchase with a mortgage now and gradually withdrawing or converting IRA funds over time in a tax-efficient manner.

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Separately, your husband's consulting income may make him eligible for a "mega backdoor Roth" if his employer's plan allows after-tax contributions and in-service Roth conversions. That's worth pursuing regardless of how you purchase your home because it increases the amount you can shift into Roth accounts.

The mega backdoor Roth can be a powerful retirement savings strategy whether you buy a house or not. It allows eligible employees to contribute far more than the standard 401(k) elective deferral limit by making after-tax 401(k) contributions and promptly converting them to a Roth account.  It will save you tens of thousands, not millions.

In 2026, the total annual 401(k) contribution limit rises to $72,000, including employee contributions, employer matching contributions, and after-tax contributions. Workers ages 50–59 and 64 and older can contribute up to $80,000, while those ages 60–63 can contribute up to $83,250, if their plan allows.

The strategy typically begins by maxing out the regular employee 401(k) contribution (either pre-tax, Roth, or a combination of both, up to $24,500 in 2026). If the employer's plan permits after-tax contributions, the employee can then make additional after-tax 401(k) contributions and convert those funds to a Roth 401(k) or roll them over to a Roth IRA.

It is especially valuable for high earners who want to save more than the standard 401(k) contribution limit or who exceed the income limits for making direct Roth IRA contributions. However, it only works if an employer-sponsored retirement plan supports after-tax contributions and allows Roth conversions or in-service rollovers.

Despite its many benefits, relatively few people use the mega backdoor Roth because many workers cannot afford to make the additional contributions, and only a minority of employer plans offer the combination of after-tax contributions and Roth conversion or rollover features needed to implement the strategy. Read more here.

Rather than treating this as a black-and-white or all-or-nothing scenario, why not dip into your taxable brokerage account, take out a mortgage, and time your IRA withdrawals or Roth conversions. Your unpredictable income could create lower-tax years to release IRA funds, reducing your required minimum distributions without triggering a massive tax bill.

Sometimes, the answer lies in those messier grey areas.

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