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Effective Tax Rates on Higher Annual Withdrawals
Old 12-01-2019, 09:41 AM   #1
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Effective Tax Rates on Higher Annual Withdrawals

I figured this might warrant a new thread as opposed to segueing my current thread on tax minimization strategies.

I am planning on a $300K/yr gross withdrawal rate (highly discretionary) which included a budget of 25% as an effective tax rate. My RE income will come solely from my investments which are split 50/50 taxable and tax differed. I have not gone into the weeds yet as to my planned withdrawal strategy (i.e. which accounts/Roth conversions/capital gains), but will have the flexibility to design my my strategy once I start withdrawals. I realize the sources of income can have a significant impact on your final effective tax rate as well as what your state tax rate is, but am wondering if I am budgeting appropriately for my taxes.

For those of you pulling say $200K/yr +, can you share the following...

- Annual withdrawal amount?
- Effective Tax rate (using gross withdrawal amount)
- What is the breakdown of the withdrawal $$ (What percent is taxed at normal tax rates such as pensions/IRA withdrawals, capital gains/qualified dividends, Roth withdrawals, other)?
- Are you taking any deductions other than standard deductions (i.e. charitable contributions)?
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Old 12-01-2019, 09:53 AM   #2
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Won't all answers depend on the accounts that one is withdrawing from and the way those accounts are taxed?

You can figure this out by using your tax prep software to plug in the numbers for several different amounts.

Here is an example: I sell $300,000 worth of an ETF from my taxable account in order to spend. The cost basis is $275,600, so my net realized capital gains is just $24,400. I am married and take the standard deduction of $24,400 (2019 number), thus my taxable income is $0.00 and I pay no taxes and my marginal tax rate is 0% which is also the same as my effective rate of 0%.
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