Will you be in a lower tax bracket in retirement?
Many people expect their tax rate to drop once the paycheck stops, and for a few years it often does. Then Social Security starts, required withdrawals begin, and a lot of retirees end up in the same bracket they had while working, or a higher one.
Why the bracket doesn't fall as far as expected
Every dollar from a traditional 401(k) or IRA is taxed as income, at your full bracket like a paycheck, not at the lower capital-gains rate. If most of your savings are pre-tax, most of your retirement income is taxable.
Up to 85% of Social Security can be taxed. Whether yours is depends on your other income plus half your benefit. The cutoffs, $25,000 for a single filer and $32,000 for a married couple, were set decades ago and have never been raised for inflation. Someone drawing from an IRA almost always crosses them.
Required withdrawals start at 73 or 75. At 73 if you were born from 1951 to 1959, at 75 if you were born in 1960 or later. Each year the IRS requires a minimum withdrawal from traditional accounts, and it grows as a share of the balance as you age. A large IRA can force out more than you want to spend, and all of it is taxable.
Some deductions leave with the job years. A paid-off mortgage means no mortgage-interest deduction. Grown children mean no child tax credit. Fewer deductions means more of the same income is taxed.
A surviving spouse files single. After one spouse dies, the survivor usually files as single from the following year. Income often falls less than you'd expect, because the larger Social Security benefit continues and the withdrawals don't shrink by half. But the single brackets are about half the width of the married ones. The same income can land in a higher bracket.
What it looks like for one couple
A married couple, both 60, with $1.6 million in traditional accounts, plan to retire at 62 and spend $9,000 a month. Both claim Social Security at 67, for $4,700 a month together. The rest of their savings is $100,000 in a Roth and $200,000 in a brokerage account.
| Age | What's happening | Taxable income | Federal bracket |
|---|---|---|---|
| 60 | Both working | $127,800 | 22% |
| 63 | Retired, living mostly on the brokerage account, no Social Security yet | about $0 | 10% |
| 68 | Social Security started | $79,000 | 12% |
| 76 | Required withdrawals started | $134,000 | 22% |
| 83 | One spouse has died, survivor files single | $159,000 | 24% |
Their bracket falls from 22% to 10% the year they stop working, and sits at 10 to 12% for most of their 60s. At 75 the required withdrawals push it back to 22%, the same bracket they had while working. For the survivor it goes higher still: 24%, and about $30,800 in federal tax, against roughly $24,700 the couple would have paid on more income in the same year.
The low-tax years in the middle
Look at the row for 63. Between the last paycheck and the start of Social Security and required withdrawals, many retirees have the lowest taxable income they'll see for the rest of their lives.
Those years are when moving money from a traditional account into a Roth costs the least tax. Pay tax on it now at a low rate, and it's no longer sitting in the account that forces the bigger withdrawals later. We'll cover that window on its own in a later article.
What can bring it down
Not everything pushes the bracket up:
- Turning 65 adds to the standard deduction.
- Roth withdrawals aren't taxable income at all, so a mix of pre-tax and Roth money gives you control over which bracket you land in each year.
- Money in a regular brokerage account is taxed only on the gain, often at the lower capital-gains rate.
- Moving to a state with no income tax changes the state side of the bill.
Why it matters
The traditional-or-Roth question, while you're still saving, depends on one comparison: your tax rate now against your tax rate when the money comes out. If you assume the later rate is lower and it isn't, the traditional account was the wrong bet for some of that money.
You don't need to guess. Your plan can show your taxable income and bracket in every year of retirement, from the accounts you have now.
See your tax by year, along with what you'll have to spend each month.
What this doesn't model
- Tax brackets are held at 2026 levels, in today's dollars, for the whole plan.
- The temporary extra deduction of $6,000 per person 65 and older, which runs from 2025 through 2028, isn't included. It ends before this couple turns 65, so it wouldn't change their figures.
- The survivor row is worked out by hand with the same tax rules, because the simulation doesn't model one spouse dying before the other.
- This example assumes a state with no income tax.
General information, not investment, tax or legal advice.
Last updated October 30, 2026 · MangoDime