Turning Income Fluctuations Into a Strategic Advantage
Key Numbers*
Net Worth
$22M
Invested Assets
with TrueNorth Wealth
$8M
* Data as of October 2025.
Subject to change.
Reducing Real Estate Concentration Risk
When Terry and Marcie came to TrueNorth in 2021, virtually all of their $14 million net worth sat in rental properties within a single metropolitan area.
While these properties had appreciated nicely and were fully paid off, having everything in one local market created significant risk.
We developed a plan to gradually sell 1-2 rental properties per year. Each sale triggered both capital gains and depreciation recapture (taxed at ordinary income rates).
Rather than paying these taxes all at once, we used the retirement plan contributions to offset this taxation. This essentially made the sales tax-neutral or even tax-negative in some years.
The proceeds were reinvested into a properly diversified portfolio across multiple asset classes and markets, dramatically reducing their exposure to a single real estate market.
Terry and Marcie had built impressive wealth: $14 million in rental properties, all of which were paid off. But their income fluctuated wildly. Between Terry’s executive role with million-dollar bonuses in peak years and Marcie’s small business, their income might swing from $300,000 in some years to over $2 million in others.
They knew they needed a smart strategy to manage crushing tax bills in high-income years and take control of their complex finances.
The Vision
Terry and Marcie wanted three things: dramatically lower tax bills, a diversified portfolio, and confidence that they were making the most of every financial opportunity. Their financial situation had become increasingly complex as their wealth grew across multiple entities and income sources, and they wanted to feel in control.
Meet Terry & Marcie
- Terry serves as CEO of a company with performance bonuses that create extreme income variability. His base salary runs around $300,000. But when the company hits targets, bonuses can amount to $1 or $2 million in a single year.
- Marcie operates a small business. Together, they manage multiple business entities, including a substantial real estate portfolio.
- Terry’s variable pay created a tax nightmare. In peak years with million-dollar bonuses, they faced massive tax bills. In slower years with just Terry’s base salary, they had limited options for tax strategies.
- Add in the complexity of multiple businesses, rental property tax issues, and estate planning for their children, and they felt overwhelmed.
TrueNorth Wealth Process
We saw that Terry and Marcie’s situation presented big challenges, but also exceptional opportunities. The income variability that created tax headaches could actually become a strategic advantage with proper planning. Plus, their multiple business entities meant we could implement powerful tax strategies.
We developed a multi-year approach that would address immediate tax concerns, diversify their real estate concentration, and leverage their income swings to build substantial tax-free wealth.
Our Strategic Solutions
- First, we set up an umbrella management company to bring together all of Terry and Marcie’s various entities. This included their rental property LLCs, Marcie’s business, and their other business activities.
- This management company sponsored a special retirement plan (a cash balance plan). Combined with 401(k) contributions, it allowed them to save $600,000–$700,000 per year on a pre-tax basis.
- In high-income years when Terry received large bonuses, these contributions saved them over $200,000 in taxes. The contributions moved income from the highest tax brackets to tax-deferred growth, providing immediate relief.
- However, the real magic happened in years when Terry’s bonus did not come through, and household income dropped to just his base salary. The retirement plan contributions in those years pushed their taxable income significantly negative — sometimes to -$250,000 or lower.
- This meant we could convert large amounts from their pre-tax retirement accounts to Roth accounts (which are never taxed again) while paying minimal — or even zero — taxes.
- In multiple years, we’ve converted over $400,000 to Roth accounts while paying close to zero in taxes. To date, they have moved well over $1 million into tax-free accounts.
Where They Are Now
Terry and Marcie’s wealth has grown from $14 million to $22 million. Their money is now properly spread across different types of assets and markets. They’ve saved over $200,000 annually in taxes during peak income years. Meanwhile, they have built over $1 million in tax-free Roth assets during lower-income years.
They now feel genuinely in control of their complex finances, and their anxiety about massive tax bills has been replaced by confidence in their long-term tax strategy. What began as a quest to pay less in taxes became a complete financial transformation. They are now positioned for a secure, tax-smart retirement with substantial assets they’ll never pay taxes on again.
This case study is based on a real client situation with names and certain details changed to protect privacy. Results may vary, and past performance is not indicative of future results.
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