Did you pay for a withdrawal roadmap? Or do you roll your own?

[RetireBy90]

I figured that is what was meant, but its not a tax torpedo... RMDs are a tax torpedo. I ignore it and include 85% of SS as taxable in my analysis because 85% of SS would be taxable even if we did NO Roth conversions or tIRA withdrawals.

Lots of pits to watch out for, but like you and others we will always have to pay on 85% so one I don’t pay attention to

 

[Al18]

pb4uski has the right idea - just assume 85% of your SS benefit will be taxed. If you're in the 12% tax bracket, you can choose 7% federal tax withholding of your SS and it will be a good estimate of your SS taxes.

 

[akck]

I maintain a spreadsheet that allows me to run what-if scenarios to predict taxes owed. I update the tax brackets each year and for 2025, the preliminary run on my tax software matches my spreadsheet. There are income streams I don’t include on the spreadsheet (I.e., interest earnings), because they aren’t significant enough to make a big difference.

 

[surprising]

I've been working on my own retirement planning software that works to maximize retirement spending and minimize taxes. It uses the same linear programming techniques as i-orp. Currently focusing on the things that matter to early retirees like pre-59.5 withdrawals strategy, accurately modeling long term cap gains taxes including 0% bracket, understanding 10% penalty for early IRA withdrawals, MAGI minimization for ACA subsidies, roth conversions, etc. I want to add modeling of the things discussed here, like CEFs, rental properties (and their taxes).

 

[G-Man]

My spreadsheet adjusts tax brackets, standard deductions, etc for inflation at the Fed target of 2%. My columns are Year, Age, Interest on taxable accounts, Dividends on Taxable accounts, Pension, My SS, DW SS, AGI, Standard deduction, Taxable income subtotal, Roth conversion, RMD, Taxable income, Ordinary income, Preferenced income, 10% tax bracket, 12% tax bracket, 22% tax bracket, Tax with rows for each year. There are also columns for taxable account balances, tax-deferred account balances and tax-free account balances that increase for investment results and Roth conversions and decrease for withdrawals for spending, Roth conversions and RMDs. The devli is in the details and it can get complicated if you try to get too precise... a reasonable approximation is fine for me.

Is the "Interest on Taxable Accounts" considered "Interest Income" and is taxed as ordinary income?
Is the "Dividends on Taxable Accounts" considered "Non-Qualified Dividend Income" and is taxed as ordinary income?

In addition, I assume the "Preferenced Income" is income such as LTGC and Qualified Dividend income that has preferential tax treatment.

 

[L-5Player]

But you will also need to weigh whether you need to drain IRA sooner because it will keep growing.

Yes, that's the complexity of long term tax planning, as opposed to one year at a time efficiency which is really what I was describing.

However, my point is that combining significant LTCG and significant regular income has pitfalls that can be reduced if you "earn" them in a particular order.

Also, the simplistic mantra about Roth conversions is "tax rate now vs. tax rate later" and if you don't fully understand the effective tax rate now, you won't make an accurate comparison. In my state, the impact of pushing a LTCG dollar past the 0% ceiling with a regular dollar in the 12% bracket is actually more like 32%!

 

[pb4uski]

Is the "Interest on Taxable Accounts" considered "Interest Income" and is taxed as ordinary income?
Is the "Dividends on Taxable Accounts" considered "Non-Qualified Dividend Income" and is taxed as ordinary income?

In addition, I assume the "Preferenced Income" is income such as LTGC and Qualified Dividend that has preferential tax treatment.

It is a rough approximation in the multi-year analysis. I first calculate income on Taxable Accounts as the beginning of year balance times an assumed investment earnings rate and then, in my case, 27% goes to Interest and 73% to Dividends. In calculating AGI the Dividends are not included in AGI (so Dividends are assumed to be 0% tax).

In our circumstances, for the multi-year projection it is a rough apprximation that is close enough.

Now when I go to actually calculate the Roth conversions for a particular year it is a more refined calculations that aligns with IRS & State Tax Calculator | 2005 -- 2025

 

[G-Man]

I first calculate income on

Not sure I understand your response.

 

[pb4uski]

Not sure I understand your response.

Somehow I pressed the wrong key and it posted before I was finished so I went back and edited it to complete the response.

 

[G-Man]

My spreadsheet adjusts tax brackets, standard deductions, etc for inflation at the Fed target of 2%. My columns are Year, Age, Interest on taxable accounts, Dividends on Taxable accounts, Pension, My SS, DW SS, AGI, Standard deduction, Taxable income subtotal, Roth conversion, RMD, Taxable income, Ordinary income, Preferenced income, 10% tax bracket, 12% tax bracket, 22% tax bracket, Tax with rows for each year. There are also columns for taxable account balances, tax-deferred account balances and tax-free account balances that increase for investment results and Roth conversions and decrease for withdrawals for spending, Roth conversions and RMDs. The devli is in the details and it can get complicated if you try to get too precise... a reasonable approximation is fine for me.

I adjusted my spreadsheet last year to include some of these columns that pb4uski has mentioned which has allowed me to calculate my federal and state income taxes in Excel using the SUMPRODUCT() function in Excel. Google it and you will find examples on how to use this function to calculate your federal and state income taxes.

 

[Sunset]

We just roll our own, knowing 85% of our SS will be taxed, we aim to keep income below IRMMA as reluctant to pay the extra taxes not knowing the future.

 

[Exchme]

Can you please explain your comment above on getting IRMAA surcharge removed based on life event.

When I quit working (and so have to go on Medicare), that is a Life Changing Event per the Medicare definition, so I will file form SS44-A, and instead of using MAGI data from when I was working, I estimate my income for the first year that I'm not.

So if I retire in 2026, I file SS44-A for 2026 and provide an estimate of my 2027 income (which will be after the LCE). Then in 2027, I file the form again and again provide an estimate for my 2027 income. In 2028, I file SS44-A again, again with my estimate of 2027 income. By 2029, they will have my actual MAGI for 2027 and will square up things if I made bad estimates.

I didn't realize I could avoid IRMAA like this, and so didn't do as large a Roth Conversions as I now wish I had.

 

[Flyfish1]

Rolled my own and manage my own assets. As stated above it is good to learn this stuff - and you have plenty of "free advisors" here.

 

[SecondCor521]

However, my point is that combining significant LTCG and significant regular income has pitfalls that can be reduced if you "earn" them in a particular order.

I'm a bit unclear on what you're saying here.

The 27% phantom bracket effect you described is a real effect. As others have pointed out, there is a similar effect with respect to taxability of SS.

However, as far as I know, there is no chronological ordering effect - all ordinary income earned within a year is reported on the tax return, and all LTCG earned within a year is reported on the tax return, without respect to month or day.

There is a logical ordering effect where the OI tax brackets are applied to ordinary income first, after which the CG tax brackets are applied to CGs second, and it is also true that the CG brackets are used up on any OI first before being applied to CGs.

Whether you're in the 27% phantom bracket is a consequence of the total amount of OI and CG you receive in a tax year, not the order in which the OI/CG is received within the year.

 

[SecondCor521]

As for the main thread question, I roll my own. After several years of looking at the question, I've decided the future is too uncertain to bother trying to plan to the dollar or even the percentage point.

I basically know the federal tax rate at which I am willing to either pay taxes below or avoid taxes above. Each tax year I can pretty easily find the AGI where an additional dollar is taxed above that rate, and I then just target that AGI via a combination of Roth conversions and HSA contributions.

 

[sdawson]

The first IRMAA is not huge, about $1K/year for each person.

Agreed. In my current spreadsheet, I'm doing a 'hybrid' approach. I am 63, three years older than my wife who is 60. That is, I'm fine going into the 1.4X IRMAA threshhold for one person. For the next three years, we'll be past that 1.4X IRMAA, but for me only. Thus we can do larger roth conversions these next three years.

Three years from now, my wife will be 63, and we can drop our conversions down to just under that IRMAA 1.4X limit. So when she retires at 65 we should both be at the lowest IRMAA limit. I'll pay the extra $1152/year ($82 + $14) * 12 for my first three years, then fall to the lowest level at age 68 and my wife is 65. That is kinda the 'hybrid' approach to IRMAA. Pay for a bit for one person early on, but avoid the $2304 hit for a couple later on.

But as was said, that could change depending on the actual on the ground conditions in three years. If stocks rise past my convervative (4%) predictions over the next three years, we could adjust if needed. Or if they crash in the next few years, I could pull back on going past that 1.4X limit.

 

[L-5Player]

However, as far as I know, there is no chronological ordering effect

In strict terms about sequencing, you are right. But I was not talking about the order in which the income is literally received. I'm talking about the order in which it is taxed, which you described and I agree with.

In practice, if you need to produce, for example, $150,000 of income, and you can use any combination of regular income and LTCG to get there, there is an optimal balance between the two if tax efficiency is your goal.

In other words (and I'm not trying to be mathematically accurate here), $100k of ordinary income and $50k of LTCG is not taxed at the same overall effective tax rate as $50k of ordinary and $100k of LTCG.

 

[engineernerd]

Can you please explain your comment above on getting IRMAA surcharge removed based on life event.

You can submit Form SSA-44 to request relief from your IRMAA surcharge if the surcharge is based on your income in a year when you had a "Life-Changing Event" that matches one of the choices on that form. Retiring fits into the "Work Stoppage" category.

 

[joesxm3]

I asked Grok the question about it being better to fill the ordinary income up to the LTCG 0% limit and then take LTCG at 15% as was claimed earlier.

This caused Grok to process the longest I have ever seen it do, 3.5 minutes. Grok seemed to agree. Although I am still trying to wrap my mind around the various permutations of this concept.

 

[jazz4cash]

Agree. 100%. Been doing my taxes in TurboTax for the last 15 years. In addition, for me, understanding the source for each line on the 1040 form was very helpful and educational for me. Understanding what AGI, Total Taxable Income, Ordinary Taxable Income and how it is taxed, Standard Deduction, Marginal Tax Brackets, Marginal Tax Rate vs Effective Tax Rate, LTGC/Qualified Dividend and how it is taxed, etc. is very helpful in understanding our tax system.

It has taken me years to understand this and my education is ongoing. Learn new stuff about taxes all the time.

I basically agree but I think tax software is too much of a black box. I guess that’s what most people want but going the extra mile to understand what’s happening inside the black box as you have done is invaluable. I use HRBlock. When I had moving expenses megacorp paid me to use a preparer. The prep guy made several errors and he was really ticked when I challenged him and I was right. The following year he made the same mistake of not excluding federal bond interest from state income.

 

[engineernerd]

To answer the original question, I'm another DIY'er. Regarding taxes, I have learned what I know from a combination of reading threads on these forums and doing my own taxes the hard way (no software, even). These forums are invaluable for many reasons but one of the best is learning about changes to tax law.

Gumby has been posting updates every year. Here's his 2026 post: Some important "trigger" levels for 2026

I do suggest to the OP that what you can do to minimize your tax bite depends quite a bit on both the size of your portfolio and the types of accounts it is held in. And your tax filing status (single or MFJ, or other). So a "Hi I Am" post might be worth the effort.

Since post #1 in this thread is also OP's very first post on these forums, I'd also want to mention that before getting too far into the weeds on taxes it's good to zoom out first, and maybe explore our favorite retirement calculator (FIRECalc, link at the top of this page) in all its glory with all its useful tabs.

Tax law is constantly changing, so I think it's a mistake to devote large amounts of time to detailed calculation of tax impacts 10+ years from now based on assuming current tax law will still be the same.

 

[TheWizard]

Fortunately, I've always had 85% of my SS taxed and my Qdivs have always been taxed at 15%, so no funny business in tax brackets for me.

I also pay mid-level IRMAA, the same tier for the past decade.

And yes, I have a financial spreadsheet but I only try to project my AGI, not my taxes. That works for me...

 

[Souschef]

My withdrawal plan is driven by my RMD. It generates more revenue than our actual needs.
I gift some to our sons, donate a lot through QCD's and use some for estimated tax payments.
I have a spreadsheet I generated and just plug in the numbers.

 

[Morgan22]

However, the next dollar of regular income, which falls into the 12% bracket, will also push a dollar of LTCG past the 0% ceiling into 15%. So you are taxed 27% on that dollar.

Huh? I don't understand this. I know that my cap gains and dividends from my taxable brokerage would never be taxed at 27%. If my taxable income is over $96,700 (Married in 2025) then my capital gains and dividends have only been taxed at 15%. If my income ever went beyond $600k in the year then I would only be taxed at 20% max on my cap gains and dividends. (That would be a good problem to have, LOL!)

 

[TheWizard]

Huh? I don't understand this. I know that my cap gains and dividends from my taxable brokerage would never be taxed at 27%. If my taxable income is over $96,700 (Married in 2025) then my capital gains and dividends have only been taxed at 15%. If my income ever went beyond $600k in the year then I would only be taxed at 20% max on my cap gains and dividends. (That would be a good problem to have, LOL!)

I'm taxed at 15% for LTCG as well.
But there are folks with lower AGI who are taxed at 0% on LTCG until their AGI exceeds a threshold.
That's what this is about...