Taxes

RetireRange estimates your income taxes inside every simulation, so the results reflect what you’d actually keep — and so you can plan around the tax decisions that matter (Roth conversions, withdrawal sequencing, when to move states). These are planning estimates, not filing-grade calculations — use them for direction, not your return.

Federal income tax

Each simulated year, RetireRange:

adds up your taxable income — withdrawals from Traditional accounts (401(k), IRA, 403(b), 457(b)) and taxable brokerage accounts, plus Roth conversions and any pension, annuity, or rental income. The income types are not all treated alike: Roth and HSA withdrawals are tax-free and don’t count at all, and only the taxable portion of Social Security (up to 85% — see Social Security taxation below) is included. (Taxable-brokerage withdrawals are counted as ordinary income here — a simplification noted under "What the model keeps simple.")
subtracts the standard deduction from that total, then
applies the progressive federal brackets for your filing status — both the standard deduction and the bracket thresholds are indexed forward for inflation each year, the way the IRS adjusts them.

One consequence worth knowing. Because Roth and HSA withdrawals never enter taxable income, a plan that draws mostly from Roth shows very little taxable income — and the standard deduction can only offset income you actually have. It’s a big part of why Roth-heavy plans often pay strikingly little tax.

Both Married Filing Jointly and Single are supported. If you model the death of a spouse, the survivor is treated as Married Filing Jointly for the entire year of death (as the IRS requires) and switches to Single the following January — which usually raises the survivor’s taxes by narrowing the brackets.

Current law, projected forward — not a forecast of future tax policy. RetireRange starts from today’s brackets, rates, and deductions and indexes them forward for inflation each year. It doesn’t try to predict future legislative changes — a scheduled sunset, new rates, a rewrite of the rules — because no one knows what they’ll be. Like the Social Security projection, it answers "what does current law imply for my plan?", and we keep those current-law tables up to date as they actually change.

Where the tax comes from. Each simulated year, RetireRange draws your estimated federal + state tax bill from your portfolio at year-end — under every withdrawal target. So taxes reduce your balances and your legacy in every scenario, and any tax you save (for example by moving to a lower-tax state) flows straight through to your ending balance. There’s no special "net of tax" mode to switch on.

Up to 85% of your Social Security can be taxable depending on your total income, following the IRS formula in Publication 915. Details and thresholds are on the Social Security page.

State income tax

RetireRange models all 50 states plus the District of Columbia — including the states with no income tax. Pick your state of residence, and RetireRange applies that state’s brackets, standard deduction, and Social Security treatment, inflated forward over time. You can also model a planned move to another state and see the effect; the state-move optimizer can even find the best year to move.

A limit on the state side: state-specific pension and military-retirement exemptions are shown but not deducted by the engine, and county/local taxes aren’t included — so a few states’ figures run slightly high.

IRMAA — the Medicare income surcharge

Once you’re on Medicare, a high income in the prior year can trigger IRMAA — an Income-Related Monthly Adjustment Amount added to your Part B and Part D premiums. It’s tiered (the more income, the bigger the surcharge), assessed per person, and RetireRange calculates it automatically.

The practical takeaway: a big one-off income event — a large RMD, a Roth conversion, a property sale — can quietly raise your Medicare premiums two years later. RetireRange surfaces this so you can plan conversions and withdrawals with the IRMAA thresholds in mind.

What the model keeps simple

Here’s where the tax modeling is deliberately approximate — and note that most of these lean conservative (they tend to overstate your tax):

Taxable-account withdrawals are treated as 100% ordinary income. Real long-term capital gains get preferential rates, so this overstates the tax on those accounts.
Roth withdrawals are treated as fully tax-free — the 5-year rule and the age-59½ rule are not enforced, so very new Roth accounts may be treated more favorably than reality.
Not modeled at all: capital-gains rates, qualified-dividend treatment, the Alternative Minimum Tax (AMT), the Net Investment Income Tax, Qualified Charitable Distributions, tax-loss harvesting, and estate tax.

See Limitations for the full list.

Taxes your heirs pay (after-tax legacy)

The after-tax legacy figure goes a step beyond your own taxes: it estimates what your heirs keep after the tax due on what they inherit, by account type. Inherited Traditional and HSA balances are taxed at your heirs’ ordinary income rate (plus an optional state rate); Roth, Taxable, and VEBA pass at full value — Roth tax-free, and the taxable account via a step-up in basis (an heir who sells right after inheriting owes no capital-gains tax on the growth during your lifetime). You set those rates on the Heir Tax Treatment card of the Assumptions tab. This is why a Roth-heavy plan often leaves more after-tax legacy than a Traditional-heavy one with the same headline balance.

One thing to know about how that heir tax is applied: the model taxes the entire inherited Traditional (or HSA) balance at once, at the rate you set — it doesn’t simulate heirs spreading those withdrawals across the SECURE Act’s 10-year window to fill up the lower brackets first. So if you set a high heir rate, the figure can overstate what your heirs actually pay. That’s deliberate — the conservative direction — but read it as a ceiling, not a precise bill. (Inherited taxable assets, by contrast, are assumed sold at the stepped-up basis with no later capital-gains drag.) See Limitations.

Using the tax numbers

The tax summary chart and the lifetime-tax figures are best used to:

gauge roughly how much of your withdrawals taxes will absorb,
compare strategies that differ in their pre-tax vs. Roth vs. taxable mix, and
spot years with spikes (big RMDs, conversions, lump sums) that push you into higher brackets or IRMAA tiers.

Don’t optimize to minimize "Lifetime Taxes Paid" on its own. At high withdrawal rates, lifetime taxes can fall simply because the portfolio depletes faster — fewer dollars left to tax — so a "low-tax" plan can actually be a failing one. Always find the high-success-rate plans first, then compare taxes within that group. See Understanding your results.

Related: Roth conversions · RMDs

RetireRange is for educational and planning purposes only and is not financial, tax, or investment advice. Tax figures are modeled estimates based on current law and the assumptions you provide — not tax advice and not suitable for filing. Consult a qualified tax professional or financial planner for advice specific to your situation. See Limitations.