Decumulation planning: Pre-tax vs Roth
In the United States, your retirement assets are usually split between tax-deferred accounts (like a Traditional 401k or Traditional IRA) and tax-free accounts (like a Roth 401k or Roth IRA). Traditional withdrawals are taxed as ordinary income, while qualified Roth withdrawals are completely tax-free. Standard financial advice typically suggests withdrawing from taxable accounts first, then pre-tax Traditional accounts, and letting your tax-free Roth accounts grow as long as possible. Our planner models this sequencing, integrating Required Minimum Distributions (RMDs) automatically to ensure tax compliance.
Retirement Portfolio Sustainability Table (US)
To help you visualize how long your portfolio might last, the table below shows estimated lifespans for different starting values at various target net incomes. These figures assume you retire at age 65, split your portfolio 80% Traditional and 20% Roth, and exclude Social Security benefits. Calculations assume a Single filer, 5.0% investment growth, 2.5% inflation, 0.5% annual fees (a net real return of 2.0%), and 0% state income tax.
| Target Net Income | $250,000 Portfolio | $500,000 Portfolio | $1,000,000 Portfolio | $2,000,000 Portfolio |
|---|---|---|---|---|
| $20,000/yr | 13 yrs (age 78) | 32 yrs (age 97) | 40+ yrs (105+) | 40+ yrs (105+) |
| $40,000/yr | 6 yrs (age 71) | 13 yrs (age 78) | 30 yrs (age 95) | 40+ yrs (105+) |
| $60,000/yr | 4 yrs (age 69) | 8 yrs (age 73) | 18 yrs (age 83) | 40+ yrs (105+) |
| $80,000/yr | 2 yrs (age 67) | 5 yrs (age 70) | 12 yrs (age 77) | 28 yrs (age 93) |
| $100,000/yr | 2 yrs (age 67) | 4 yrs (age 69) | 9 yrs (age 74) | 21 yrs (age 86) |
| $150,000/yr | 1 yr (age 66) | 2 yrs (age 67) | 6 yrs (age 71) | 12 yrs (age 77) |
Case Study: Decumulating a $500,000 US Retirement Portfolio
To see how Traditional and Roth sequencing, standard deductions, and Social Security interact under 2026 federal rules, let's look at a case study of a retiree, Robert, who claims income at age 65 with a $500,000 portfolio split: $400,000 Traditional (pre-tax) and $100,000 Roth (after-tax). His target net income is $40,000 a year (in today's money), rising with inflation.
Year 1 to 2: Drawing Pre-Tax Assets (Before Social Security)
At age 65, Robert does not yet claim Social Security. To meet his $40,000 net target, he draws entirely from his Traditional assets. The engine solves for the gross Traditional withdrawal needed after federal taxes:
- Robert takes a standard deduction of $16,100 plus an additional $2,050 senior deduction (for being 65+), making $18,150 of his income tax-free.
- To receive $40,000 net, he must make a gross Traditional withdrawal of approximately $43,150. Federal taxes are calculated on the taxable AGI of $25,000 ($43,150 - $18,150), leading to $3,150 in federal income tax.
Year 3: Social Security Kicks In
At age 67, Robert claims his full Social Security benefit of $24,000 a year (in today's money). This reduces the drawdown burden on his portfolio drastically:
- To achieve his $40,000 net income target, he now only needs a net withdrawal of $16,000 from his investments.
- However, his Social Security benefits are now partially taxable. The IRS Combined Income formula is applied: $16,000 (drawdown) + 50% of $24,000 (SS) = $28,000.
- Since $28,000 is between the $25,000 and $34,000 single brackets, 50% of his Social Security ($12,000) becomes subject to federal income tax.
- Robert's gross Traditional withdrawal drops from $43,150 in Year 1 to just $17,350. This vastly reduces the rate at which his portfolio is depleted.
Age 73 onwards: Required Minimum Distributions (RMDs)
When Robert turns 73, he is mandated by the IRS to start taking RMDs from his remaining Traditional assets. If the RMD amount exceeds the withdrawal needed to meet his net target, the excess is moved into a taxable account, and the higher taxable income can increase the portion of his Social Security benefits that are taxed (up to 85%). Roth assets remain untouched and continue to grow tax-free, serving as a buffer for later years.
Required Minimum Distributions (RMDs)
To prevent tax-deferred retirement accounts from growing tax-free indefinitely, the IRS mandates Required Minimum Distributions. Under current SECURE 2.0 rules, RMDs must start at age 73 (increasing to 75 for anyone born in 1960 or later). The RMD is calculated annually by dividing your traditional account balance as of December 31 of the previous year by a life expectancy factor from the IRS Uniform Lifetime Table (Table III). If you fail to withdraw your RMD, you could face an excise tax equal to 25% (or 10% if corrected quickly) of the amount not taken.
How Social Security benefits are taxed
Many retirees are surprised to learn that their Social Security benefits can be taxable. The IRS uses a metric called Combined Income (Provisional Income) to determine what portion of your Social Security is subject to federal income tax:
- Combined Income = Adjusted Gross Income (AGI) + Non-taxable interest + 50% of your Social Security benefits.
- Single Filers: If combined income is between $25,000 and $34,000, up to 50% of benefits are taxable. Over $34,000, up to 85% of benefits are taxable.
- Married Joint Filers: If combined income is between $32,000 and $44,000, up to 50% of benefits are taxable. Over $44,000, up to 85% of benefits are taxable.
Using Roth withdrawals instead of Traditional withdrawals is a common strategy to lower AGI and protect Social Security from taxation.
Social Security claiming age: 62 vs 67 vs 70
You can claim Social Security retirement benefits as early as age 62, but doing so permanently reduces your benefit. Your Full Retirement Age (FRA) is 67 if you were born in 1960 or later. If you claim at 62, your monthly check is reduced by 30%. Conversely, if you delay claiming beyond age 67, you earn Delayed Retirement Credits of 8% per year up to age 70, resulting in a maximum benefit of 124% of your primary insurance amount (PIA).
Understanding the US Retirement Tax Structure
Planning for US retirement decumulation requires managing three distinct tax buckets to minimize your overall lifetime tax burden:
- 1. Tax-Free Roth Accounts: Roth IRAs and Roth 401(k)s are funded with after-tax dollars. Qualified withdrawals in retirement are 100% tax-free and do not trigger higher Medicare premiums or Social Security taxation.
- 2. Tax-Deferred Traditional Accounts: Traditional IRAs and 401(k)s provide tax deductions during accumulation, but every dollar withdrawn in retirement is taxed as ordinary income. Mandatory RMDs begin at age 73 or 75.
- 3. Social Security Benefits: Up to 85% of your Social Security benefits become taxable if your combined income exceeds IRS thresholds ($25,000 Single / $32,000 MFJ).
Frequently asked questions
How long will $1,000,000 last in retirement?
A common guideline is the 4% rule, which suggests a $1M portfolio can safely support $40,000 of initial annual withdrawals (adjusted for inflation) for 30 years. However, high taxes, investment fees, and market volatility can reduce this. Using our US calculator can help you model your specific Traditional/Roth breakdown and tax filing status.
What is the difference between Traditional and Roth accounts?
Traditional IRAs and 401(k)s are funded with pre-tax dollars; you receive a tax deduction now, but withdrawals in retirement are taxed as ordinary income. Roth accounts are funded with after-tax dollars; you get no deduction now, but qualified withdrawals in retirement are completely tax-free.
Does this calculator include state income taxes?
Yes. Under the "Advanced Assumptions" tab, you can input your estimated state income tax rate (e.g. 3% to 6%) which is calculated on top of federal tax brackets.
At what age does the Social Security benefit stop growing?
Social Security delayed retirement credits stop accumulating at age 70. There is no financial benefit to delaying your claim beyond age 70.
Assumptions & methodology
This tool models your retirement savings year by year. Pre-tax Traditional assets are modeled separately from Roth assets, with Traditional drawn down first and Roth preserved. We adjust spending, Social Security, and other income for inflation annually. RMDs start at age 73 — the SECURE 2.0 age for those born 1951–1959; it is 75 for anyone born in 1960 or later — using the IRS Uniform Lifetime Table (Table III). The engine grosses up Traditional withdrawals to cover 2026 federal tax brackets (Single or MFJ) plus your chosen state rate, applying the standard deduction ($16,100 Single / $32,200 MFJ) plus the permanent age-65+ additional standard deduction ($2,050 Single / $3,300 MFJ where both spouses are 65+). The temporary OBBBA senior bonus deduction ($6,000 per person, tax years 2025–2028) is not modeled, as it sunsets within the projection window. Growth is applied net of your selected fees. Illustrated figures are projections and real-world results will vary.