Nov 4, 2026

I’m a Financial Advisor: This After-Tax Retirement Number Matters More Than Your Balance

Think $1 million means you can retire? There’s more to the math.

A seven-figure retirement balance sounds like a finish line. But that number doesn't tell you how much income will actually reach your checking account after federal and state taxes, Medicare premiums and the tax effects of withdrawals on Social Security.

Experts suggest a sharper yardstick: how much sustainable, after-tax income your savings can actually produce. It’s the number that determines whether you can really afford to stop working, and it’s worth running before you pick a retirement date.

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Measure Spendable Income, Not Just Your Nest Egg

Retirement readiness is not as simple as the numbers in your accounts.

“The most important number is their gross distribution rate,” said Steven Talia, certified financial planner (CFP) and CEO of My Pro: Trusted Pros.

He encourages near-retirees to take into account the pre-tax dollar amount they need to maintain their desired lifestyle. Then, “compare that distribution rate to their assumed rate of return and analyze the feasibility and sustainability of the plan.”

Zachary Sahar, a certified public accountant (CPA) and managing director at Capital Tax, takes the idea a step further by focusing on how much sustainable, spendable income a portfolio can produce after taxes.

“For example, a two-million-dollar retirement balance sounds reassuring, but it doesn't tell me how much of that money belongs to the retiree and how much will eventually go toward taxes.”

Not All Dollars Are Created Equal

Identical account balances can produce very different spendable income depending on how each account is taxed.

Roger Fishel, independent financial advisor and founder of Roger Fishel Financial, broke it down this way: traditional 401(k) and IRA withdrawals are generally taxed as ordinary income, qualified Roth withdrawals are generally tax-free and taxable brokerage accounts land in the middle —you’ve already paid tax on what you put in, and gains are often taxed at lower capital gains rates, sometimes 0%.

“A dollar in each of these three buckets is not worth the same dollar,” said Fishel.

Consider two retirees who each withdraw 4%, or $40,000, from a $1 million portfolio. The one pulling from a qualified Roth IRA keeps the full $40,000. The one pulling from a traditional 401(k) or IRA may owe ordinary income tax on the entire amount.

Withdrawals Can Cost More Than the Tax Bill

Pre-tax withdrawals can do more damage than the tax on the withdrawal itself. Depending on the retiree’s situation, that extra income can make more Social Security benefits taxable and push Medicare premiums higher.

“You have to look at what a withdrawal does to the entire tax picture," said Sahar.

That’s because Social Security taxation depends on provisional income, which Fishel defines as your other income plus half your benefits.

“Once that crosses $32,000 for married couples or $25,000 for singles, benefits begin to be taxed," continued Sahar. "Those thresholds were never indexed for inflation, so more retirees cross them every year.”

Up to 85% of benefits can end up taxable, depending on income. And Medicare’s income-related monthly adjustment amounts (IRMAA) work the same way. A big withdrawal today can raise your Medicare premiums two years from now.

Start Planning Before RMDs Take Over

Waiting until required minimum distributions (RMDs) kick in can leave you with less control over your taxable income. Under current law, RMDs generally begin at 73 for people born from 1951 to 1959 and at 75 for those born in 1960 or later.

Fishel said you should ideally start planning 10 years before retirement, but no later than five. That way, "you still have time to shift where new savings go and to plan Roth conversions."

These should be revisited annually, and after any major event such as a retirement date, a spouse's death or changes in tax law.

Build a Tax-Smart Withdrawal Plan

Near retirees can work with a CFP or tax professional to run scenarios of annual cash flow from each account type, plus Social Security timing, state taxes, Medicare thresholds and costs like long-term care.

Your account balance may show how much you have saved, but your after-tax income projection shows how much of retirement you can actually afford. Run it before you put in your notice, not after the first tax bill shows up.

This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.

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Written by

Jordan Rosenfeld

Jordan Rosenfeld is a Senior Writer for MoneyLion and author of eleven books. Her articles and essays about finance and other topics have been published widely in such places as The Atlantic, The Billfold, Good Magazine, GOBankingRates, Daily Worth, Quartz, Medical Economics, The New York Times, Paypal, The Washington Post and for numerous business clients. As someone who has personally grown from financial literacy, she enjoys writing about personal finance to empower and educate people on how to live a better quality of life.

Edited by

Ashleigh Ray

Ashleigh is an editor specializing in personal finance and banking content, with four years of experience — first at GOBankingRates, then at MoneyLion — turning complex financial topics into advice readers can actually understand and use. She holds an MFA in Creative Writing from the University of South Florida and brings that same care for clarity and voice to every piece she edits. She's based in Tampa, Florida.