Retired and Single? What's your marginal tax rate?

[tulak]

I've been retirement planning over the last week - aiming for 2028 - and it's made me think about withdrawals and taxes. A lot of my portfolio is in tax-deferred accounts, and I was hoping to drain this significantly before collecting SS and RMDs. I'm in high tax bracket now and assumed that I would be in the 24% bracket when I retire, but now I'm thinking about staying in the 22% bracket. Still figuring that out...

It made me curious though, if you're retired and single, what marginal tax bracket do you try to stay in? And if you care to share, why?

 

[TheWizard]

Almost 12 complete years into retirement, I'm towards the top of the 24% Federal tax bracket and have been since TCJA.
We'll see what happens if that act expires...

 

[DayDreaming]

I'm in the lower end of the 22% bracket. I also have nearly half of my savings in tax-deferred accounts, but I'm not doing Roth conversions now because that would impact my ACA subsidies for health insurance. When RMD's hit, I'll be in the 24% bracket but I don't think there's much I can really do about that, so I look at it as a nice problem to have.

 

[PaunchyPirate]

I don't know how to specifically determine my marginal tax rate. TurboTax displays an "Effective Tax Rate" on its summary page of the PDF file you save after submitting your taxes. Is that the same as marginal tax rate? That page says my Effective Tax Rate was 6.84% in 2023. So I answered this poll with 10%.

If my definition above is accurate, I think my Effective Tax Rate will be 0% in 2024 because I'm going to claim a home energy tax credit for a new furnace and AC system that will reduce my taxes due for the year to $0.

I also manage my income levels to maximize ACA subsidies. I'm also single, age 62.

 

[FiveDriver]

I don't know how to specifically determine my marginal tax rate. TurboTax displays an "Effective Tax Rate" on its summary page of the PDF file you save after submitting your taxes. Is that the same as marginal tax rate? That page says my Effective Tax Rate was 6.84% in 2023. So I answered this poll with 10%.

If my definition above is accurate, I think my Effective Tax Rate will be 0% in 2024 because I'm going to claim a home energy tax credit for a new furnace and AC system that will reduce my taxes due for the year to $0.

I also manage my income levels to maximize ACA subsidies.

You ask a valid question about determining one's 'Marginal' Rate vs Effective Rate. I don't know the answer, but TT's Effective Tax Rate doesn't feel like the right answer here.

I ask our august committee -- How do you folks determine "Marginal" rate?

 

[athena53]

22%. Would have been lower but I did a Roth conversion. The impact on my first RMD in 2026 will be rounding error but every little bit helps.

 

[tulak]

Marginal tax rate based on the 2025 tax tables. Effective tax rate is different. I should have made that clearer.

And yes, effective tax rate might vary. It’s tricky if you can itemize or take tax credits. That’s why you can clarify for your situation. There’s no right answer.

Here’s the 2025 single tax table:

Tax Rate	Taxable Income Range

10%	$0 to $11,925

12%	$11,926 to $48,475

22%	$48,476 to $103,350

24%	$103,351 to $197,300

32%	$197,301 to $250,525

35%	$250,526 to $626,350

37%	Over $626,350

Courtesy of ChatGPT.

 

[TheWizard]

You ask a valid question about determining one's 'Marginal' Rate vs Effective Rate. I don't know the answer, but TT's Effective Tax Rate doesn't feel like the right answer here.

I ask our august committee -- How do you folks determine "Marginal" rate?

For various reasons, Marginal Rate isn't always the same as your tax bracket.
Best way is by using your tax software after finishing your 2024 return. Add $100 of Ordinary Income to your return and see how much your tax goes up. If it goes up $30 then your marginal rate is 30%.

Also note that I have three different marginal rates, depending on whether that extra $100 is Ordinary Income, SS income, or Qualified Dividends...

 

[PaunchyPirate]

OK, so I guess from the 2023 tax return, the best answer would be whatever is on line #15 "This is your taxable income."

I was in the 12% bracket in 2023. By $60.

 

[copyright1997reloaded]

For 2024, in the middle of the 24% marginal. Middle as I tried to keep IRMMA from going to the 3rd bracket. I will need to decide strategy for 2025. I did my IRMAA exception estimate at 160K (same as 2024), but might just do tIRA withdraws or Roth conversions to to the top of the 24% marginal bracket (and thus would have to redo/pay up on IRMAA, i.e. notify social security).

 

[aja8888]

22% due to having to pull taxable RMDs and paying taxes on 85% of my SS. I'm single.

 

[FLSUnFIRE]

So far my effective tax rate is negative; I've only paid SE tax on my little 1099 income and receive PTC towards my health insurance far in excess of the tax I owe. My marginal rate is about 12% as every dollar I earn costs me about 12¢ in PTC.

I've not paid a dime of regular income tax yet but eventually will. I'm in the zero percent tax bracket as the standard deduction covers all my regular income and LTGC are well within the 0% bracket. Marginal rate is about 12%

 

[RunningBum]

I think I have everything in for 2024. My marginal rate is 18.5% (10% + 8.5% for ACA subsidy loss) with a $220 buffer. If I go $100 over that buffer it's 33.5% (10% + 15% QDivs + 8.5% subsidy loss).

If you only look at your regular income tax bracket you're doing it wrong. Aside from the QDivs/LTCGs pushed into being taxed and ACA subsidy loss, here are some other things that can add to your marginal tax rate with another $100 of income:

- IRMAA (reaching a new tier)
- SS benefits (if the full 85% is not taxed, more income causes more of this to be taxed, and in turn can cause even more QDivs to be taxed)
- NIIT
- Reduction of medical expense deduction
- Reduction of foreign tax credit?
I'm sure there are others I'm not thinking of right now.

Too nit-picky? No, not at all. The main reason to look at marginal rate is to determine the impact of taking more optional income, perhaps from a Roth conversion, or reducing income from perhaps an IRA/401K/HSA contribution. You should figure out the actual total rate on that when making your decision.

 

[SloHan]

I am at the top of the 22% marginal bracket. The why is because I am doing Roth conversions every year trying to avoid the 24% bracket once SS and eventually RMD’s kick in.

OP I built up my taxable account before retiring. The taxable account has been helpful for paying Roth conversion taxes and general spending.

 

[Alex The Great]

I'm at 12% marginal but actually in 0% bracket for 2024 and hope to keep it this way to claim a subsidy for ACA, while it is available.

 

[SecondCor521]

I've been retirement planning over the last week - aiming for 2028 - and it's made me think about withdrawals and taxes. A lot of my portfolio is in tax-deferred accounts, and I was hoping to drain this significantly before collecting SS and RMDs. I'm in high tax bracket now and assumed that I would be in the 24% bracket when I retire, but now I'm thinking about staying in the 22% bracket. Still figuring that out...

It made me curious though, if you're retired and single, what marginal tax bracket do you try to stay in? And if you care to share, why?

I look at my actual marginal rate, not just the basic tax bracket, for all the reasons already mentioned.

I try to roughly figure my tax rate for each year between now and age 85 and look at the maximum marginal rate during that window. I use a homebrew Excel spreadsheet for this which is probably not 100% accurate but is close enough.

I then voluntarily pull income forward up to that rate via Roth conversions.

Lather rinse repeat each year.

So for example, if it looks like I'm going to pay, say 25% at age 78, then I'll do Roth conversions up to the point where my actual marginal rate approaches but stays below that 25% number. (I have a natural and slight preference for deferring taxes if it's unclear whether I'll be saving money or not.)

Usually I end up hitting an ACA-related breakpoint and so it's very clear for me where to stop because the actual marginal rate jumps by ~7 percentage points and stays higher beyond that point - for example, from 22% to 29% or something.

I dial things in to the exact dollar by Roth converting to about $200 over my AGI target using the Case Study Spreadsheet, then making an HSA contribution after I get all my tax documents and do my taxes in the actual tax software I use.

 

[teej1985]

So far my effective tax rate is negative; I've only paid SE tax on my little 1099 income and receive PTC towards my health insurance far in excess of the tax I owe. My marginal rate is about 12% as every dollar I earn costs me about 12¢ in PTC.

I've not paid a dime of regular income tax yet but eventually will. I'm in the zero percent tax bracket as the standard deduction covers all my regular income and LTGC are well within the 0% bracket. Marginal rate is about 12%

Has it been like this every year since you retired? When do you expect to start paying taxes?

 

[FLSUnFIRE]

Has it been like this every year since you retired? When do you expect to start paying taxes?

Yes, since my first full tax year of retirement.

I'm not sure when, I'm debating playing with Roth Conversions but I'm not sure that the math will make the arbitrage very attractive as a single guy; however, I suspect tax rates may be going up over my life so it could prove to be beneficial. If I don't convert, it will either be when my expenses increase enough that I need to realize more income (but that's not too likely outside of an emergency) or when I start SEPPs that will throw a bunch of regular income on my 1040. Starting SEPPs really depends on returns in my taxable account but I'm thinking I'll start at ~54.5 y/o regardless of my taxable balance.

 

[Lakedog]

Upper half of 24% bracket due to pension and most investments being in taxable accounts. Don't really give much thought to reducing taxes/IRMAA anymore.