Retirement Tax Planner
See your tax burden every year from retirement to age 95. Social Security taxation, RMDs, capital gains, IRMAA surcharges, and state taxes all interact in ways that are hard to predict. ThunderHarbor models the full picture using your actual numbers so nothing surprises you.
Why tax planning matters more in retirement
During your working years, tax planning is relatively straightforward. You earn a salary, maybe contribute to a 401(k), and file once a year. Your income is predictable and your tax situation is stable. Retirement changes everything.
In retirement, you control how much income you realize. You can pull from a traditional IRA (taxable), a Roth IRA (tax-free), or a brokerage account (capital gains). You can delay Social Security or claim it early. You can do Roth conversions or leave the money in place. Each choice changes your tax bill — and the ripple effects carry forward for decades.
A married couple with $1.5M in retirement accounts might pay anywhere from $150,000 to $400,000 in taxes over a 30-year retirement depending on their withdrawal strategy. That is a $250,000 difference driven entirely by when and how they take income — not by investment returns.
How different retirement income is taxed
Traditional 401(k) and IRA withdrawals
Every dollar withdrawn from a traditional retirement account is taxed as ordinary income at your federal and state rates. A $100,000 withdrawal could cost $22,000-$37,000 in taxes depending on your bracket. Starting at age 73, required minimum distributions (RMDs) force you to withdraw — and pay tax on — a growing percentage of your traditional balance each year whether you need the money or not.
Social Security benefits
Up to 85% of your Social Security can be taxable at the federal level. The threshold is based on your combined income — adjusted gross income plus nontaxable interest plus half of your Social Security benefit. If your combined income exceeds $25,000 (single) or $32,000 (married), a portion of your benefit becomes taxable. Each additional dollar of income above the threshold can cause 50 cents to 85 cents of Social Security to become taxable, creating an effective marginal rate that is much higher than your nominal bracket.
Roth withdrawals
Qualified Roth withdrawals are completely tax-free — they do not count as income, they do not trigger Social Security taxation, and they do not affect IRMAA or ACA calculations. This is why Roth conversions can be so valuable: they move money from the "fully taxable" column to the "never taxed" column.
Capital gains and dividends
Selling investments in a taxable brokerage account triggers capital gains tax on the growth. If your taxable income is below roughly $47,000–$49,000 (single) or $94,000–$98,000 (married) — the IRS adjusts this annually for inflation, long-term capital gains are taxed at 0%. Above that, rates jump to 15% and then 20% at higher thresholds. If your income exceeds $200,000 (single) or $250,000 (married), the 3.8% Net Investment Income Tax adds to the bill. Strategic harvesting of gains in the 0% bracket is one of the most overlooked tax-saving opportunities in retirement.
Common tax mistakes retirees make
The biggest mistakes are not the obvious ones. They are the interactions — the ways that one decision cascades through multiple parts of the tax code:
- Ignoring RMDs until they arrive. At age 73, the IRS requires you to withdraw a percentage of your traditional IRA based on your life expectancy. For a $1M balance, the first RMD is roughly $37,000. By age 85, it can exceed $60,000. These mandatory withdrawals can push you into higher brackets and trigger IRMAA surcharges on Medicare premiums.
- Claiming Social Security too early without modeling the tax impact. Claiming at 62 vs. 70 means a permanently reduced benefit, but it also means more years of taxable Social Security income that can push your combined income over thresholds and trigger taxation of benefits that would otherwise be tax-free.
- Selling the wrong accounts first. Spending down your taxable brokerage while leaving traditional IRAs untouched maximizes future RMDs and the associated tax bomb. Sometimes it is better to spend tax-deferred money first to reduce the RMD problem.
- Missing the 0% capital gains bracket. In years where your income is low — early retirement before Social Security and RMDs — you may be able to realize thousands of dollars in long-term capital gains at a 0% federal rate. Most people do not even know this bracket exists.
- Not accounting for state taxes. State tax treatment of retirement income varies dramatically. Some states exempt Social Security, some exempt pension income, some tax everything. Moving or even adjusting your income mix can save thousands per year at the state level.
How ThunderHarbor models your retirement taxes
ThunderHarbor runs a year-by-year projection from your current age to age 95, calculating taxes at each step:
- Aggregates all income for the year — Social Security, pension, salary, dividends, capital gains, RMDs, and withdrawals from each account type
- Applies federal tax brackets with the standard deduction or itemized deductions
- Calculates the taxable portion of Social Security using the combined income formula
- Applies state tax rules based on your state of residence, including state-specific exemptions for retirement income
- Checks for the 3.8% Net Investment Income Tax when MAGI exceeds the threshold
- Calculates IRMAA surcharges on Medicare premiums using the two-year lookback
- Checks ACA subsidy eligibility and calculates the effective cost of lost subsidies if income exceeds thresholds
- Shows you the complete tax picture — federal, state, and hidden surcharges — for every year of your retirement
This is not a static snapshot. When you adjust your Social Security claiming age, change your Roth conversion strategy, or model a part-time job, every downstream year recalculates automatically. You see the tax implications of each decision before you make it.
Frequently asked questions
How are retirement withdrawals taxed?
It depends on the account type. Traditional 401(k) and IRA withdrawals are taxed as ordinary income. Roth withdrawals are tax-free if the account has been open at least five years and you are 59½ or older. Taxable brokerage withdrawals trigger capital gains tax on the growth portion, with rates depending on your total income.
What is the tax on Social Security benefits?
Up to 85% of your Social Security benefits can be taxable at the federal level. The threshold depends on your combined income. If it exceeds $25,000 (single) or $32,000 (married filing jointly), a portion becomes taxable. Many states also tax Social Security, though a growing number exempt it entirely.
How do I minimize taxes in retirement?
Key strategies include managing withdrawal order to stay in lower brackets, doing Roth conversions during low-income years before RMDs begin, harvesting capital gains in the 0% bracket, timing Social Security to reduce combined income, and being aware of IRMAA and ACA subsidy thresholds.
Should I pay taxes now or later in retirement?
It depends on your current vs. expected future tax rate. If you expect to be in a higher bracket during RMDs, paying taxes now via Roth conversions can save money. The right answer changes every year based on your income, deductions, and life events.
What is the Net Investment Income Tax (NIIT)?
The NIIT is a 3.8% surtax on investment income that applies when your modified adjusted gross income exceeds $200,000 (single) or $250,000 (married filing jointly). Large capital gains or Roth conversions that push your MAGI over the threshold can trigger this additional tax.
See your retirement tax projection
Enter your numbers and get a year-by-year breakdown of federal and state taxes.
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