Federal tax on retirement income
The marginal rate is not the bracket rate, and it is not monotone
Every dollar withdrawn from a traditional account can drag up to 85 cents of an otherwise untaxed Social Security benefit into taxable income along with it, on top of being taxed itself. That is why the rate on the next withdrawn dollar -- the marginal rate below -- can run well above the bracket you think you are in, and why it can fall as income rises: once 85% of the benefit is already taxed, an extra dollar stops dragging any more of it along, and the rate drops back to the plain bracket rate. This curve, at your benefit, age and filing status, holding the mix of ordinary income you enter above fixed and varying only the next dollar:
| Traditional withdrawal | Federal tax | Marginal rate on the next dollar |
|---|
What this leaves out
This models 26 U.S.C. 86 (Social Security taxation), the age-65 addition to the standard deduction under 63(f), and the temporary senior bonus deduction under 63(c)(8) -- all federal. It does not model the 10% early-distribution penalty, pensions, or any state's own treatment of retirement income. This is arithmetic on the numbers you enter, not tax advice.