Retirment accounts, taxes and FIRE calculation


I’m wondering how others account for their taxable retirement account holdings in their net worth calculations for FIRE, especially since taxable retirement accounts represent a fairly substantial proportion of holdings in this community, myself included. I’m not considering Roths, just 401Ks and similar taxable accounts

Considering that some of these holdings are not “net” in that they’re subject to taxes upon withdrawal, I’ve been assuming a 15% reduction in that part of my net worth, assuming that when I withdraw from these accounts, 15% of the money will be taxed. Of course, I realize we really can’t predict what the tax rate will be 5, 10 or 20 years in the future, but a 15-20% effective tax rate is about what it would be if I started withdrawals today.

I’m aware of withdrawal strategies to reduce the amount of taxes we’ll pay at retirement but even keeping taxable withdrawals to a minimum will trigger some tax.

So in determining the total amount I need to retire, using the Trinity SWA of 4% and 40K as my goal would mean I need one million dollars to safely retire (and being on the conservative side, I’m thinking of reducing that to a 3% rate which means I need even more). I’m not sure if the Trinity study accounted for taxes so when determining the total net worth do you increase it by some amount to factor in a tax rate?

Always appreciate others’ perspectives. Thanks, Paul


I believe you would include an estimate for your taxes as a part of your annual expenses. So if your non-tax spending is $40k and you estimate (for example) $5k in annual taxes, you would use $45k as your annual need. Assuming a 4% withdrawal rate, it would mean an investment pool of $1.125M is required.



Pretty simple,
More money coming in from investments than going out for lifestyle and cost to manage investments = FIRE
Living the Dream :tropical_drink:


As I understand it so long as you can keep your income under about $37K (single) $75K (Married) you won’t owe capital gains. See here:

Anyway, I’ve figured that we will probably be pretty minimal income. So, unless they change the rules drastically, I don’t put a lot of thought into it. Basically going with the comment above. Thinking of it like a monthly expense and planning for that.

I’m also hoping we leave the tax hungry state of California. Capital gains are considered standard income here. Craziness!!


I have my taxes as part of my projected expenses. I don’t contribute to a Roth, only 401k and after tax accounts, hope to get to a 60/40 split when I FIRE. Will do Roth conversions and capital gain step up basis over a long period of time to pay little or zero taxes.

I’m shooting for 4% swr. The trinity study does not account for social security(survivor at 60, mine at 70), part time income, lower flexible spending so I think it’s plenty safe for me.

To minimize sequence of return risks, plan to have a lean budget the first 5 years through geo-arbitrage and thru-hiking.


Thanks to all for their comments. Very hard to predict these things but having a cushion and thinking conservatively makes sense, which is why I’m aiming for a 3% withdrawal rate even though I may have to work one or two years longer to get there. I’m also worried about health care costs rising more than inflation and having more need of them as I get older.


Somewhat same situation was faced by my uncle. To be free for any legal formalities and to manage his taxable retirement properly he hired a professional tax preparation near me service. The preparer provided him with practical and convenient tips for tax saving. It is always good to hire a professional assistance.