His current setup is built for a W-2 employee with a 30-year runway — not someone who might leave his job in the next 24 months.
Most of their savings are locked in tax-deferred accounts they can’t touch without penalty. Their “runway fund” is sitting in volatile equities — one bad month in the market and it could get cut in half. And she has nothing in her name.
When he leaves his job, they’ll need liquidity, flexibility, and predictable cash flow. Right now, they don’t have enough of any of those.
- Redirect that cash flow to Backdoor Roth IRAs for both of them ($7,500 each)
- His employer doesn’t allow after-tax contributions, so the Backdoor Roth is the move
- Roth contributions (not earnings) can be withdrawn anytime, penalty-free — this money can fund the business if needed, or grow tax-free forever if they don’t touch it
- This also opens a retirement account in her name for the first time
- The kids are young — time is on their side
- Frees up $850/month for debt payoff and runway building right now
- We revisit once the business is generating income
- Eliminating a car payment frees up meaningful monthly cash flow
- Fewer fixed obligations = more runway and less pressure in year one of the business
- Shift from mostly equities to a mostly bond/stable portfolio
- Goal: grow this to $100K+ combined with Roth contributions
- A market drop the month before he leaves his job shouldn’t cut the runway in half — that’s not a risk worth taking
This case study is a fictional example created for illustrative purposes only. It does not constitute investment advice, financial planning advice, tax advice, or a recommendation of any specific strategy or product. Every individual’s financial situation is unique. Please consult a qualified financial advisor before making any financial decisions.