3 ms·

You're not counting income tax which, unless it's coming from a 401k, is a meaningful amount.

• Thorrez 2y ago
  If you're withdrawing from a traditional (pre-tax) 401k or traditional IRA, you have to pay income tax on it. If you're withdrawing from a roth 401k or roth IRA, you don't have to pay any tax on it. If you're withdrawing from a taxable stock market account, you have to pay capital gains tax on the gains. If you're withdrawing from a bank account, you don't have to pay any tax on it (you pay tax on the interest as you get interest). In the worst case scenario (traditional), $70k of withdrawals would be taxed the same as $70k of income. So this would be enough savings for someone who was making $70k before retirement. Probably actually better, because the person wouldn't have to save some of the withdrawals for retirement, and would get social security.
  • deleted 2y ago
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• thunky 2y ago
  Long term capital gains and qualified dividends are taxed lower than regular income, if at all. And this should be most of their income.
  • seanmcdirmid 2y ago
    Normal 401K is taxed as income because the contributions aren’t taxed on the way in. Your investments that are based on principal that has already been taxed will be taxed as capital gains.
    • thunky 2y ago
      Yeah good point, this will make a dent if most/all of their $ is coming from a 401k. Hopefully they have other sources to pull from to lower their taxable income (and tax bracket). And at least there is the standard deduction. And maybe no state income tax.