How much will taxes reduce my retirement income?
Your gross income is not the amount available to spend. Different retirement-income sources can be taxed differently, and withdrawals may affect other costs as well.
Not every retirement dollar is the same
Traditional IRA and 401(k)
Distributions are generally included in taxable income, subject to applicable rules.
Qualified Roth withdrawals
Qualified distributions can provide flexibility when managing taxable income.
Social Security and investments
Benefits may be partly taxable, while investment income depends on its source and holding history.
Plan from spending backward
Estimate what you want to spend
Start with the lifestyle amount that must reach your checking account.
Add federal and state taxes
Estimate the gross income and withdrawals required to support that spending.
Compare withdrawal sources
Explore whether the order and mix of withdrawals changes the result.
Questions worth modeling
- How much of Social Security may be taxable?
- What happens when required minimum distributions begin?
- Could Roth conversions be useful in lower-income years?
- How do state taxes affect your projected take-home money?
- Could higher income affect Medicare-related premiums?
Tax results depend on current law and individual circumstances. Use projections for education and consult a qualified tax professional before acting.
Plan around the money you can actually spend.
Estimate taxes alongside income, withdrawals, and retirement expenses.
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