Taxation Hesitation

While employed, we are dual income and at the higher tax bracket. When retired and on a lower, fixed income, sudden tax-deferred disbursements may push us from a low tax bracket back to a higher one.

US Federal Tax (state is separate) Rates as of 2024 are:

Married couples filing jointly

  • 12% $23,201 to $94,300

  • 22% $94,301 to $201,050

  • 24% $201,051 to $383,900

  • 32% $383,901 to $487,450

So if we fall from 32% to 24%, we would want to avoid any taxable income pushing over $383,900.

If one’s living expenses were $201,051 in a year and withdrawing that from a tax-deferred IRA or 401k, that income would be taxed at 24% and not 22%. Possibly a difference of $4000 in taxes.

Michael Wei