Will Your Tax Rate Really Be Higher in Retirement?
You’ve probably heard the pitch. “Tax rates are going up, so convert now before they do.” It gets repeated at dinner seminars and in a thousand online articles. I’ll be straight with you: I’m not going to make that argument, even though I help people with Roth conversions for a living. Here’s why it’s weaker than it sounds, and what actually matters instead.
The “rates are going up” pitch just lost its main leg
For years the rate-fear story had one real fact under it. The 2017 tax law set its lower brackets to expire at the end of 2025. That expiration was the thing salespeople pointed at. “Rates revert in 2026, act now.”
That expiration didn’t happen. The law passed in 2025 made those brackets permanent, with no scheduled sunset. The seven rates people have been filing under, 10% through 37%, carry forward. “Permanent” only means they don’t expire on their own. A future Congress can always rewrite the code. Nobody can promise you what rates do in twenty years.
And that’s the point. If the whole case for a big move rests on guessing the direction of rates two decades out, it’s resting on a guess. We can build a stronger case than that, one that doesn’t need a crystal ball.
A note on what this post is not
This isn’t me telling you taxes will be low forever. It’s me telling you to stop deciding based on a number nobody knows. There’s a better question, and it has actual math behind it.
Effective tax rate vs. marginal tax rate (the part almost nobody explains)
Here’s the key. Most people walk around with one number in their head, their tax bracket, and they think that’s the rate they pay. It isn’t.
Your marginal tax rate is the rate on your last dollar, the top bracket your income reaches. Your effective tax rate is your total tax divided by your total income. They are not the same number, and the effective tax rate lands lower, often by a wide margin.
Why? Because the brackets stack. Your first chunk of income gets taxed at the lowest rate. The next chunk at the next rate up. Only the income above each threshold gets the higher rate.
What that looks like with real dollars
Picture a retired married couple, both 66, filing jointly with $180,000 of income in 2026. First, their deductions come off the top.
| What comes off their income | Amount |
|---|---|
| Standard deduction, married filing jointly | $32,200 |
| Extra deduction, both spouses 65 or older | $3,300 |
| Senior deduction, trimmed because income tops $150,000 | $10,200 |
| Taxable income left over | $134,300 |
That $134,300 reaches into the 22% bracket. Ask most people what rate this couple pays and they’ll say 22%. Watch what the brackets actually do.
| Tax bracket | Income taxed at that rate | Tax |
|---|---|---|
| 10% | First $24,800 | $2,480 |
| 12% | Next $76,000 | $9,120 |
| 22% | Last $33,500 | $7,370 |
| Total federal income tax | $18,970 | |
Illustrative and hypothetical. Built on 2026 federal figures from IRS Revenue Procedure 2025-32, verified July 2026: the $32,200 married-filing-jointly standard deduction, the $1,650 extra deduction for each spouse 65 or older, and the $6,000 per-person senior deduction, which shrinks by 6 cents for every dollar of income above $150,000 for a couple and is scheduled to run through 2028. Assumes all $180,000 is ordinary taxable income. Federal only, no state tax, no credits, no Social Security in the mix. Your own return will look different.
Their marginal tax bracket is 22%. Their tax comes to $18,970 on $180,000 of income. Divide it out. Their effective tax rate is about 10.5%.
Look at that gap. More than eleven percentage points between the number they fear and the number they actually pay.
Has anyone ever sat down and shown you the difference between those two rates on your own return? Most people have never seen it. And it matters, because the rate-fear pitch quietly swaps them. It scares you with your marginal tax bracket while you actually live on your effective tax rate.
For a lot of retirees, the effective tax rate goes down, not up
When the paychecks stop, a few things usually happen at once. Wage income disappears. Total income often drops. The standard deduction still shelters a big slice of what’s left. For many retirees, especially early in retirement before other income sources switch on, the effective tax rate in those first years is the lowest it’s been in decades.
That’s not a reason to relax. It’s the opposite. Those low-rate years are an opening, and they don’t last. We call that stretch the conversion window. Which brings us to the part the rate-fear pitch skips entirely.
When your taxes do climb, it’s usually structure, not rates
Picture a calm, snow-loaded slope above a town. Nothing’s moving. Then a few things let go at once, and they knock each other loose, and what was quiet becomes a slide. That’s the picture behind what we call the Retirement Tax Avalanche: a set of structural forces in the tax code that sit quiet for a while, then start triggering each other. Notice that none of this needs rates to rise. It happens regardless of what rates do.
Here’s what’s on the slope.
Required minimum distributions
At a set age the government makes you pull money out of your traditional IRA and 401(k) whether you need it or not, and that forced income is taxable. Here’s how required minimum distributions work. The longer your accounts grew, the bigger the forced withdrawal, and the higher it can push your income.
Social Security becoming taxable
As your other income rises, and that can start the moment you turn on your benefit depending on how your income is structured, more of your Social Security gets pulled into your taxable income. Income triggering more taxable income.
IRMAA
Past certain income thresholds, your Medicare premiums step up. It’s a surcharge that keys off your income from two years prior. Here’s what IRMAA is and why it matters. A one-time income spike can raise your Medicare bill later.
The widow’s penalty
When one spouse dies, two separate things happen. First, household income drops. The survivor keeps the larger of the two Social Security benefits and loses the other one, and if there’s a pension, part of that can be cut too. Second, and separately, the survivor now files single, where the brackets are tighter and the standard deduction is smaller, so the income that’s left gets taxed harder. It hits widowers exactly the same way it hits widows. We’ve written about the widow’s penalty on its own.
The money your kids inherit
A traditional IRA passed to adult children generally has to be emptied within ten years, and every dollar lands on top of their income, often during their peak earning years. The tax bill doesn’t disappear when you pass it down. It can land harder.
Any one of these can quietly raise your effective tax rate years from now, on the income you’ve already got, without a single bracket changing. That’s the real question hiding under “will rates be higher.” It isn’t really about rates. It’s about whether your own taxable income is going to get forced up, and into what structure, when it does.
Where Roth conversions fit, and where they don’t
This is why those low-rate early years matter. A Roth conversion means moving money from a traditional IRA, where it’ll be taxed later, into a Roth, where it grows and comes out tax-free. You pay the tax now, on purpose, in a low year, or in a year when it’s simply more efficient to do it, to take income off that loaded slope before it can build up. Here’s how Roth conversions can lower lifetime taxes. You’re choosing to pay tax on the seed instead of the whole harvest.
I want to be straight about the limits, though. Conversions don’t help everyone. For some people the math says leave it alone, and a good advisor will tell you that. Whether a conversion actually leaves you with more money depends on your income, your timeline, your heirs, and what your retirement income is built to do, not on a prediction about rates.
There’s also a piece traditional planning gets wrong. The old framing says a conversion means “you have less to spend.” That’s only half true. Your retirement paycheck can be built from guaranteed income you can’t outlive, what we call Protected Lifetime Income (PLI). When you pair conversion years with a Protected Lifetime Income floor, set up early enough to use the runway, the picture can change. Some people use less money to create more income, which means they don’t necessarily spend less, and for many families there’s still something left behind. Here’s where guaranteed lifetime income fits, and where it doesn’t. The point isn’t to scare you about rates. It’s to use the years you’ve got well.
The real answer: run the numbers
Which way does it break for you? Lower rate in retirement, or higher? I won’t guess, and I’d be wary of anyone who does.
Here’s the version with the math behind it. Run the numbers, on software you trust, before you move a dollar. The numbers don’t make the decision. They show you the size of what’s at stake, and then you decide. If a move changes your lifetime tax picture by a hundred thousand dollars, that’s worth a hard look. If it’s twenty-five thousand, it’s a closer call and it’s your call. If it barely moves the needle, the decision is easy.
Most online Roth calculators will lead you wrong, even by accident, because they can’t see your whole picture. We run your real numbers on what we believe is the most comprehensive conversion engine in the industry, and part of the job is telling you when to do nothing. Looking is free and reversible. The conversion isn’t. There’s no recharacterization anymore. It never hurts to look. It can hurt to act without looking.
Questions people ask about taxes in retirement
Not necessarily. For many retirees the effective tax rate drops in the early years after work stops, because wage income is gone and the standard deduction still shelters a slice of what is left. What can raise it later is structural: forced IRA withdrawals, more of your Social Security becoming taxable, Medicare surcharges, and a surviving spouse filing single. The only way to know your answer is to run your own numbers.
Your tax bracket, the marginal rate, is the rate on your last dollar. Your effective tax rate is your total tax divided by your total income, and it lands lower because the early dollars are taxed at lower rates first. In an illustrative 2026 example, a retired married couple in the 22% bracket pays an effective tax rate closer to 10.5%. People fear their bracket while they actually live on their effective rate. Figures are illustrative and hypothetical.
The 2017 brackets were made permanent in 2025 with no scheduled expiration, so the argument that rates are about to snap back no longer holds. A stronger reason to consider a conversion is structural: taking income off the table before forced withdrawals and the related effects build up. Whether it makes sense for you is a math question, not a rate prediction.
Usually structure, not rates. Required minimum distributions force taxable income out of your traditional IRA. Rising income pulls more of your Social Security into the taxable column. Medicare surcharges step up past certain thresholds. And a surviving spouse files single, where the brackets are tighter. Any of these can raise your effective tax rate without a single bracket changing.
Have your numbers run on planning software that can see your full picture: your accounts, your timeline, your Social Security, and your heirs. A good review shows you the size of the decision, including when the right answer is to do nothing.
About Kurt H. Jackson
Experience: Kurt H. Jackson has spent more than 16 years working directly with retirees and pre-retirees in Missouri, Nebraska, Kansas, Iowa, and Florida. After the dot-com crash in 2003, he started reverse-engineering the traditional save-and-withdraw model, and what he found changed everything about how he approaches retirement income. Before founding KJ Financial, he spent 20+ years as a Certified Mortgage Planner working with more than 1,000 clients.
Expertise: Kurt is a Retirement Lifestyle Architect and the creator of the Lifestyle-First Retirement Income Planning framework. He is Life and Health Insurance Licensed in MO (8035802), NE, KS, IA (NPN 14954049), and FL (W192044). His practice focuses exclusively on insurance-based, tax-optimized retirement income strategies including Protected Lifetime Income (PLI) design, Roth conversion planning, and the Retirement Tax Avalanche. He does not manage investments or sell securities.
Authoritativeness: Kurt founded KJ Financial and operates MaxMyRetirementIncome.com as a dedicated educational resource for retirees. His Lifestyle-First framework is built on peer-reviewed research from Wade Pfau, Morningstar, BlackRock, and EBRI. Every income figure published on this site is based on actual carrier quotes and current research, updated regularly.
Trustworthiness: KJ Financial is a compliance-first firm. All income figures are presented as illustrative and hypothetical. Kurt H. Jackson is not a securities broker, registered investment advisor, or CPA. Guarantees rely on the claims-paying ability of the issuing insurance company.
1014 E. 5th St., Maryville, MO 64468 | Direct: 816.582.5532 | [email protected] | www.MaxMyRetirementIncome.com
This article is for educational purposes only and is not tax, legal, or investment advice. Kurt H. Jackson is a licensed life and health insurance professional, not a CPA, attorney, registered investment advisor, or securities broker. Tax figures reflect 2026 federal law (IRS Revenue Procedure 2025-32) as verified in July 2026 and are subject to change. All dollar figures are illustrative and hypothetical and are not a prediction or a promise of any result. Consult a qualified tax professional before acting.
Sources
- Internal Revenue Service, rules on required minimum distributions, the SECURE Act, and taxation of retirement income. irs.gov
- Social Security Administration, benefit rules and taxation of Social Security. ssa.gov
- Centers for Medicare & Medicaid Services, including IRMAA income-related surcharges. medicare.gov
- Morningstar, “The State of Retirement Income” (2025).
- Wade Pfau, sequence-of-returns and safe-withdrawal research.
- BlackRock, research on guaranteed income and retirement spending.
- Illustrative guaranteed-income figures are current carrier estimates, are hypothetical, and depend on your age, your contract, and the carrier at the time of purchase.