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My income taxes will instantly triple or quadruple when I have to start IRA withdrawals, ten years from now at age 70. I have written a retirement planning spread sheet for myself, that includes my taxable and sheltered accounts, my pension, my Social Security, income tax calculations, the basis in my taxable account, projected inflation and investment returns, portion of gain paid currently and hence taxed, and other things. From all this, and using Excel's built-in mathematical optimization software, I determined that it is indeed better for me to pay (some) now and the rest later by making small optional withdrawals from the IRA each year in my sixties. (Excel has no problem with such ten-dimensional optimization problems and found a different withdrawal for each year.) It's not a huge benefit to me, but worthwhile.

My conclusions are that you will do both -- pay now and pay later -- and that you need to do the calculations to determine the most advantageous policy for you in balancing your taxable and sheltered accounts. This is yet another recommendation that you write yourself a spreadsheet for personal retirement planning. Then, vary your assumptions. I specifically recommend Excel so that you'll have access to its mathematical optimization capability, Solver, which seems to me to be far more usable than the competition. I use Solver, for example, to find the budget that will minimize the variance in the purchasing power of my retirement account over a 35-year planning period.

You mention a 50% tax bracket, which hints that you have added a state income tax to the federal nominal maximum tax bracket of 39.6%. I'm eliminating state income taxes from my plans by moving from California (maximum income tax rate 9.3%, but deductible) to Nevada (no state income tax, none, zero, zip). It's called "voting with my feet".


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