Tools to Model Income Tax Returns During Retirement

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G-Man

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I'm trying to find the best tool to model income tax returns during retirement.

Besides cash, unfortunately all of my retirement investments are taxable income. No Roth accounts. I'm currently using the NewRetirement tool and the federal and state income taxes estimated seems insane.
 
G-Man said:
I'm trying to find the best tool to model income tax returns during retirement.

Besides cash, unfortunately all of my retirement investments are taxable income. No Roth accounts. I'm currently using the NewRetirement tool and the federal and state income taxes estimated seems insane.
Click to expand...


I'm retired and have been able to get all my income for the next year in December. I run possible withdrawals in December with Dinkytown Tax calculator to figure out how to maximize income and stay in whatever tax bracket I want. It has served me well.
 
I'm looking for a tool where you can input your income amounts and income sources (401K, Social Security, Roth, HSA, etc.) per year and it will generate a federal and state income tax return estimate. It will apply the standard deduction based on your filing status.
 
I used Income Strategy to model our spending plan which included taxes considering all sources or income. Cost me $20.

But now that I’m close to 70 I wanted to drill down for precise tax planning details as we transition into SS and RMDs - beginning in 2024 thru 2026. I manually entered our detailed numbers for 2022 thru 2027 using https://www.aarp.org/money/taxes/1040_tax_calculator.html and have them summarized on a planning spreadsheet. It’s a great tool, as is dinkytown linked in the post below (I think they’re the same).

That allows me to optimize remaining Roth conversions and other income levers from now thru 2026. Once DW and I are both 72, our tax picture won’t change much at all, except for changes in IRS tax code - which we can’t predict or change. So there’s no need to model after we’re both 72 unless/until RMD rules change again (e.g. Secure Act 2.0 passage).
 
Last edited:
G-Man said:
I'm trying to find the best tool to model income tax returns during retirement.

Besides cash, unfortunately all of my retirement investments are taxable income. No Roth accounts. I'm currently using the NewRetirement tool and the federal and state income taxes estimated seems insane.
Click to expand...
Do you type in tax percentages yourself? You would use effective tax rates, not your top tax brackets.

The more accurate the options you put in, the likelihood of your estimates being close increases.

I use Flexible Retirement Planner.
 
I don't use a calculator, just the Form 1040 instructions for my federal tax and CT-1040 instructions for my state tax. I estimate what my various types and amounts of income will be through the years and what that will mean for my taxes. When I'm feeling ambitious, I create a spreadsheet. One crucial thing is to be clear on which things are indexed for inflation (like marginal brackets) and which are not (like NIIT).
 
G-Man said:
I'm trying to find the best tool to model income tax returns during retirement. ...
Click to expand...

I like https://www.irscalculators.com/tax-calculator

It does state and federal income taxes and is easy to use. Only thing that I don't like about it is that it doesn't get the standard deduction right for MFJ both over 65 by $200 but I can easily adjust for that if I want to.
 
G-Man said:
I'm currently using the NewRetirement tool and the federal and state income taxes estimated seems insane.
Click to expand...
"insane" is a meaningless description. Maybe your perception of taxes in retirement is off, or maybe the tool is bad, or maybe you aren't using it right. We don't even know if you mean insanely high or insanely low. Give %s or real numbers, and which state you are in.
 
I was concerned about that some years back. I hired a FA to project retirement income RMD's taxes, expenses etc. He had a good report generated. From his report, I created my own spreadsheet replicating his math. I have kept it up to date every year. I do a rough calculation of my taxes from it and determine my Roth conversion amounts against IRMMA.

I will say that I liked having a different set of eyes on it.
 
target2019 said:
Do you type in tax percentages yourself? You would use effective tax rates, not your top tax brackets.

The more accurate the options you put in, the likelihood of your estimates being close increases.

I use Flexible Retirement Planner.
Click to expand...

No, I do not type in the percentage. The software "NewRetirement" figures out the taxes for you. Whether the taxes are accurate or not, is another story. I will try to post some documentation on the Tax planner feature within the NewRetirement software.
 
G-Man said:
I'm looking for a tool where you can input your income amounts and income sources (401K, Social Security, Roth, HSA, etc.) per year and it will generate a federal and state income tax return estimate. It will apply the standard deduction based on your filing status.
Click to expand...

https://www.irscalculators.com/tax-calculator will do that with a little manipulating.

401k withdrawals would included in unearned income. It has a separate field for social security. Roths withdrawals are not taxed unless you are under 59-1/2. HSA withdrawals are not taxed if for qualifying medical costs. You select your filing status from a dropdown menu near the top left of the input area.
 
CRLLS said:
I was concerned about that some years back. I hired a FA to project retirement income RMD's taxes, expenses etc. He had a good report generated. From his report, I created my own spreadsheet replicating his math. I have kept it up to date every year. I do a rough calculation of my taxes from it and determine my Roth conversion amounts against IRMMA.

I will say that I liked having a different set of eyes on it.
Click to expand...

Willing to share the spreadsheet? PM me.
 
RunningBum said:
"insane" is a meaningless description. Maybe your perception of taxes in retirement is off, or maybe the tool is bad, or maybe you aren't using it right. We don't even know if you mean insanely high or insanely low. Give %s or real numbers, and which state you are in.
Click to expand...

Meaning, I did not do a good job in investing in "Tax free" investments over the years. No Roth IRA, no 401K Roth, etc. Now when I retire, I don't see how I can utilize any tax strategy to reduce my taxes in retirement.
 
G-Man said:
Meaning, I did not do a good job in investing in "Tax free" investments over the years. No Roth IRA, no 401K Roth, etc. Now when I retire, I don't see how I can utilize any tax strategy to reduce my taxes in retirement.
Click to expand...
Then retirement planners in general won't give you an answer. A meeting with a tax CPA might help. But I think you need to define this tax problem better. For example, when we use IRA or are forced into RMD, we pay tax on the entire withdrawal. On that point you are ahead, but of course you paid more tax in the past, all things equal.

If you're in a higher tax bracket, then tax-free muni income might make sense.
 
G-Man said:
No, I do not type in the percentage. The software "NewRetirement" figures out the taxes for you. Whether the taxes are accurate or not, is another story. I will try to post some documentation on the Tax planner feature within the NewRetirement software.
Click to expand...

Why can you take a few different years and put the same inputs that you are using for NewRetirement into https://www.irscalculators.com/tax-calculator and see how the total income tax compares?... if it is close then you can assume that NewRetirement is caluclating it right.
 
pb4uski said:
Why can you take a few different years and put the same inputs that you are using for NewRetirement into https://www.irscalculators.com/tax-calculator and see how the total income tax compares?... if it is close then you can assume that NewRetirement is caluclating it right.
Click to expand...

Here is the comparison in taxes.

Federal - $3900 less in NewRetirement
State - $793 less in NewRetirement
FICA - $3267 more in NewRetirement
 
Why would you have FICA taxes if you don't have earnings? (at least from what you've told us).
 
pb4uski said:
Why would you have FICA taxes if you don't have earnings? (at least from what you've told us).
Click to expand...

Sorry. Let me compare a full year in retirement. I was comparing a year where I worked and retired in the same year.
 
I simply use my tax software and create alternate tax returns. I start with my current return and then adjust all the inputs that need adjusting. I have been doing this for years.
 
I honestly don't worry too much about "taxes" per se. Not a lot I can do. I already am able to deduct a fair amount for charity. But AGI/MAGI limits can bite. I try to manage for the various things like IRMAA (MC increased payments). I figure most of my income will be top of 22%. 24% is just below IRMAA so not a big issue - but IRMAA is.

Thinking about over-RMDing to deplete my 401(k) before the % required becomes un-managable. Details aren't something I'm that interested in. Just don't want any surprises. YMMV
 
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