Retirement planning once you're already retired

The planning problem changes when the paycheck stops. While you were working, your tax bracket was set by your salary and the main question was how much to save. Now your bracket is set by what you withdraw, when you claim Social Security, and eventually by required minimum distributions you don't get to decline. The job shifts from accumulating to sequencing: which account funds each year, what that does to your bracket, and what it costs across the rest of your life rather than this April.

How much can I withdraw each year without running out?

There's no single safe number, and the honest version of the answer starts with what you actually spend. The common starting point is about 4% of the portfolio in the first year, raised with inflation after that. I walked through how that number gets built in do you have enough to retire. That came out of Bill Bengen's 1994 research, which tested a 30-year retirement against historical returns, and it was never meant as a rule so much as a floor that survived the worst starting years on record.

Two things matter more than the percentage.

The first is what the money is for. A withdrawal rate applied to an unexamined budget produces a number that's precise and not useful. Retirement spending is usually not flat: the first decade is often the most expensive, spending settles in the middle years, and health costs can climb at the end. A plan built on a single inflation-adjusted line misses all of that.

The second is when the bad returns arrive. A portfolio that averages 7% over thirty years supports a very different withdrawal if the losing years come first. Selling shares to fund spending in a down market removes shares that aren't there to recover, which is why the same average return produces two different outcomes depending only on the order. This is sequence-of-returns risk, and it's why the first five years of retirement carry more weight than any five years that follow.

The response isn't a lower withdrawal rate. It's holding enough in cash and short bonds that a bad year can be funded without selling equities, and being willing to adjust spending rather than treating the first-year number as a contract.

When do required minimum distributions start, and how is the amount calculated?

It depends on your birth year: 73 if you were born between 1951 and 1959, 75 if you were born in 1960 or later. Congress moved the age twice in recent years, which is why the answer depends on your birth year rather than a single number.

The calculation is your prior-year December 31 balance divided by a life expectancy factor from the IRS Uniform Lifetime Table. At 73 the divisor is 26.5, which works out to about 3.8% of the balance. At 75 it's 24.6, about 4.1%. At 85 it's 16.0, about 6.3%. The percentage climbs every year, so the required withdrawal grows as a share of a balance that may also be growing.

A few mechanics that cause problems:

Your first RMD can be delayed to April 1 of the following year, and usually shouldn't be. Delaying means taking two distributions in one calendar year, which stacks both into one tax bracket and one Medicare income year.

Each traditional IRA's RMD is calculated separately, but the total can be taken from any one of them. 401(k)s don't work that way. Each plan's RMD has to come out of that plan.

Roth IRAs have no RMD during your lifetime. Roth 401(k)s no longer do either, as of 2024.

The penalty for missing one is 25%, reduced to 10% if corrected promptly. SECURE 2.0 cut it from the old 50%, but it's still the most expensive filing mistake available to a retiree.

Which account should I draw from first?

The conventional order is taxable first, then tax-deferred, then Roth. It's a reasonable default, and it optimizes for the wrong thing: deferring tax rather than minimizing it across the years you have left.

Drawing only from taxable accounts early leaves the traditional balance compounding untouched, which means a larger required distribution later, at an age when you have fewer levers. The alternative is filling low brackets deliberately in the early years, through withdrawals or Roth conversions, and accepting tax now at a rate you choose instead of later at a rate that gets chosen for you.

What tends to work better than a fixed order is a blended one. Fund the year from whichever combination of accounts lands your taxable income at a target you set in advance, with the target set by a bracket edge or an income threshold rather than by which account feels natural to spend.

The thresholds that bind, in rough order of when they show up:

The 0% capital gains rate. Long-term gains are taxed at 0% up to $98,900 of taxable income for a married couple in 2026. Ordinary income fills that space first, so a large IRA withdrawal can quietly convert a tax-free gain into a taxable one.

Marketplace subsidy cliffs, if you retired before 65. Health coverage before Medicare is priced off modified adjusted gross income, and the enhanced subsidies expired at the end of 2025. As things stand for 2026, there's a hard cutoff at 400% of the federal poverty level.

Medicare income-related surcharges from 65 on. For a couple in 2026 the first tier starts at $218,000, and one dollar over triggers the full amount.

The taxable share of Social Security. Covered below, and it's the one that operates without appearing on any bracket table.

Do Roth conversions still make sense after RMDs have started?

Sometimes, but the math gets harder once they start. The required distribution comes out first and fills the low brackets before a conversion can use them. Once RMDs begin, a conversion sits on top of income you were already forced to recognize, so it's usually taxed at your marginal rate rather than at a filled-in low bracket.

The conversion can't be used to satisfy the RMD either. The required amount has to be distributed first, and it has to leave the retirement system rather than move to a Roth.

There are still situations where converting after 75 pays:

A surviving spouse facing the filing status change described below, where next year's rate is higher than this year's. A year with unusually low income, such as a large medical deduction. An estate where the beneficiaries are in higher brackets than you are, which is more common than it used to be: under the SECURE Act most non-spouse beneficiaries have to empty an inherited IRA within ten years, and under the 2024 final regulations, if you die after your required beginning date they also owe annual distributions during those ten years rather than a single balloon at the end. Those ten years frequently land in a beneficiary's peak earning decade.

The general shape holds. Conversions are most valuable in the window between your last paycheck and your first required distribution. After that they become situational rather than structural.

How do qualified charitable distributions work, and when do they beat writing a check?

A qualified charitable distribution sends money straight from your IRA to a charity, and the amount never enters your income at all. In 2026 the limit is $111,000 per person, so $222,000 for a couple who each have an IRA, and it's indexed annually.

The advantage over a normal donation is that it works whether or not you itemize. A charitable deduction only helps to the extent your itemized total exceeds the standard deduction, and for a couple both 65 or older in 2026 that's $35,500 before a charitable gift produces any federal benefit at all. Stack the temporary $6,000-per-person senior deduction on top, which is scheduled to expire after 2028, and the first $47,500 of income is already sheltered.

Excluding income rather than deducting it also does something a deduction can't. Because the money never enters adjusted gross income, it doesn't count toward the Medicare surcharge thresholds, doesn't push capital gains out of the 0% rate, and doesn't increase the taxable share of your Social Security. A deduction sits below all of those lines. An exclusion sits above them.

That distinction is worth holding onto, because it cuts the other way too. The senior deduction reduces taxable income but not AGI, so it lowers your bracket without doing anything for IRMAA, for the capital gains cutoff, or for provisional income. Two provisions, similar-looking benefits, and only one of them moves the thresholds that matter most.

The rules are unforgiving in a few specific places:

You qualify at 70½, not at RMD age. The two ages are different and the gap is deliberate. You can start making QCDs years before distributions are required.

It counts toward your RMD. If your required distribution is $60,000 and you send $25,000 as a QCD, you have $35,000 left to take.

Take the QCD before any other withdrawal that year. The first dollars out of an IRA are treated as satisfying the RMD, so a QCD made after you've taken the full required amount no longer offsets it.

The transfer has to go from the custodian to the charity. Withdrawing the money and writing your own check is a taxable distribution and an itemized deduction, which is the outcome you were trying to avoid.

Donor-advised funds and private foundations don't qualify. This is the one that trips up people used to giving through a DAF.

There's also a once-per-lifetime option to direct up to $55,000 in 2026 into a charitable remainder trust or a charitable gift annuity. It's narrow, and it's worth knowing exists.

How is Social Security taxed once other income is coming in?

Somewhere between none of it and 85% of it, depending on a figure called provisional income: your adjusted gross income, plus tax-exempt interest, plus half of your Social Security benefit.

For a married couple, no benefit is taxable below $32,000 of provisional income. Between $32,000 and $44,000, up to 50% becomes taxable. Above $44,000, up to 85% does. For a single filer the thresholds are $25,000 and $34,000.

Those four numbers have never been indexed for inflation. They were written into law in 1983 and 1993 and haven't moved since. When they were set, a small minority of beneficiaries owed tax on any of it. The share has grown every year since, by design.

The practical consequence is a stretch of income where each additional dollar of withdrawal drags a portion of your benefit into taxable income alongside it. In that stretch the effective marginal rate can meaningfully exceed the bracket you appear to be in. Withdrawals sized against your visible bracket, without the benefit interaction modeled, cost more than they look like they cost.

This is also the strongest argument for having built Roth balances earlier, and it interacts with when you start the benefit. Roth distributions are excluded from provisional income entirely, so they fund spending without pulling the benefit along behind them.

What happens to my taxes when one spouse dies?

You file jointly for the year your spouse dies, then as a single filer from the following year on. That one change does most of the damage. Household income falls by less than half, while the standard deduction roughly halves, the brackets compress, and the Medicare surcharge thresholds drop to about half of the couple's figures.

The numbers are worth seeing.

In 2026 a couple both 65 or older take a $32,200 standard deduction plus $1,650 each for age, which is $35,500. A survivor filing single takes $16,100 plus $2,050 for age, which is $18,150. The age bump is larger for an unmarried filer, so the deduction lands at 51% of the couple's rather than exactly half.

The temporary senior deduction compounds it. It's $6,000 per person aged 65 or older, and it phases out at 6% of MAGI above $150,000 for a couple and above $75,000 for a single filer. So the amount halves and the threshold halves at the same time.

Take a couple with $110,000 of MAGI, both over 65. They shelter $35,500 in standard deduction plus the full $12,000 senior deduction, since they're well under the phase-out. That's $47,500.

One spouse dies. The survivor's income falls to $85,000, because one Social Security benefit stops and the smaller one is what continues. The survivor now shelters $18,150 plus a senior deduction phased down to $5,400, because MAGI is $10,000 over the single threshold. That's $23,550.

Income fell 23%. Shelter fell 50%. The same household, one year apart.

There's a second effect at the same income. The couple at $110,000 had $108,000 of room before the Medicare surcharge, which starts at $218,000 for a couple in 2026. The single-filer threshold is exactly half that, $109,000, so the survivor at $85,000 has $24,000 of room. Neither is paying a surcharge. But a large distribution, a capital gain, or a conversion the household would have absorbed without noticing now puts the survivor over the line.

Almost none of this is discretionary once it happens. It is, however, entirely predictable beforehand.

Conversions done while both spouses are alive are taxed at joint brackets and produce assets the survivor can spend without adding to income, which is what the conversion is actually buying: room the survivor won't otherwise have. Beneficiary designations reviewed in advance keep the survivor out of the delays that force badly-timed distributions. Knowing which accounts get a step-up in basis and which don't changes what the survivor should spend first.

The reason to plan around this isn't that the tax is large in isolation. It's that it arrives in the same year as everything else, at the moment when nobody involved is in a position to run projections.

The senior deduction described above is scheduled to expire after 2028. The arithmetic changes when it does.

What can I do about a Medicare surcharge triggered by a one-time income spike?

If a qualifying life-changing event caused the income, you can ask Social Security to recalculate it on form SSA-44 rather than waiting two years for it to fall off on its own.

The surcharge is set by your tax return from two years earlier, so your 2026 premium reflects your 2024 income. That lag is why the appeal exists: a lot can change in two years, and the Social Security Administration recognizes a specific list of events that make the old return unrepresentative. Work stoppage or reduction, marriage, divorce or annulment, death of a spouse, loss of income-producing property, loss of pension income, and certain employer settlement payments all qualify.

Retirement itself counts as work stoppage. The surcharge in your first year or two of retirement is being calculated from your final working year's income, and the form exists specifically to fix that.

What doesn't qualify is worth stating just as plainly. A Roth conversion is not a life-changing event. Neither is a large capital gain, an inherited IRA distribution, or a house sale. Voluntary income that pushes you over a threshold stays over it, which is why conversion sizing has to account for the surcharge before the money moves rather than after.

Does my state tax retirement income?

It varies enough that the answer changes what you should do, not just what you owe. Some states exempt Social Security and some don't. Some exempt pensions and not IRA withdrawals. A few tax nothing at all.

Arizona is a useful worked example, partly because it's where I practice and partly because it's unusually clean.

Social Security is fully exempt from Arizona tax, regardless of income. Military retirement pay is fully exempt. Up to $2,500 of federal, Arizona state, or Arizona local government pension income can be subtracted. Everything else, meaning IRA withdrawals, 401(k) distributions, private pensions, and capital gains, is taxed at a flat 2.5% for tax year 2026, with no local or city income tax anywhere in the state. Arizona imposes no estate or inheritance tax.

Verify the current-year rate before relying on it. Arizona's flat rate arrived through a revenue-trigger law that fully phased in for 2023, and legislative proposals to change it come up periodically.

The planning consequence of a flat rate is that state tax stops being a timing variable. In a state with graduated brackets, spreading income across years lowers the state bill the same way it lowers the federal one. At a flat rate it can't, so the timing work is driven entirely by federal brackets, Medicare thresholds, and the Social Security interaction. That simplifies the problem. It also means the Social Security exemption is doing most of the state-level work, which matters more the larger your benefit is relative to your withdrawals.

If you're in a different state, the questions are the same three: whether Social Security is taxed, whether retirement account withdrawals are taxed, and whether the rate is flat or graduated. The third determines whether state tax belongs in your withdrawal timing at all.