How Rightmont Computes Your Financial Future

Taxes are recalculated every projected year, not estimated once. Each year we apply the current progressive federal brackets to your income after the standard deduction ($32,200 married filing jointly), a state income tax rate you can set, FICA on wages including the 0.9% Additional Medicare surtax above the threshold, bracketed long-term capital gains on taxable investment sales, and the IRS provisional-income worksheet to determine how much of your Social Security is taxable. The same calculation runs behind every page, so the tax figure on a scenario page and the one in your plan come from the same source. These are modeled projections using current law, not tax advice.

Your marginal rate is what the next dollar you earn would be taxed at. Your effective rate is total tax divided by total income, and it is always lower, because the earlier dollars were taxed in lower brackets. A common mistake is applying the marginal rate to all income — that overstates tax substantially. Rightmont reports both per year, and applies the bracket-by-bracket calculation rather than a single rate.

No. Only the income above the bracket threshold is taxed at the higher rate — the income below it stays taxed at the lower rates. Moving into a higher bracket never reduces your take-home pay. (Benefit cliffs, which are a different mechanism, genuinely can; those depend on programs Rightmont does not model.)

Partly, and it is important to know the limit. We apply one flat state income tax rate that you set, defaulting to 5%. We do NOT model progressive state brackets, and we do not model state-specific retirement income exclusions. Because most states do not tax Social Security and many exempt some pension or retirement income, a single flat rate tends to OVERSTATE tax in retirement for most households. Treat the state portion as an approximation, not a filing figure.

Yes. Interest on cash and high-yield savings is ordinary income, taxed at your regular federal rate in every year you earn it — while you are working as well as in retirement. It is not deferred and it does not get the lower long-term capital gains rates. This is one reason holding a very large cash balance is expensive: it earns less than invested assets and is taxed at a higher rate on what it does earn. Rightmont's default is to hold a set number of months of expenses in cash and invest the rest, with that target recalculated each year from your actual expenses so it keeps pace as your costs rise.

Long-term capital gains are taxed at 0%, 15%, or 20% depending on your taxable income — not a flat rate. Gains stack on top of your ordinary income, exactly as the real calculation works: your ordinary income fills the brackets first, then gains are layered above it. Married filing jointly, the 0% band runs to $98,900 of taxable income and the 20% rate begins above $613,700. Filing single, the 0% band runs to $49,450. We also track your cost basis, so only the gain portion of a withdrawal is taxed, not the whole amount.

If your taxable income is low enough, long-term capital gains are taxed at 0% federally. Married filing jointly, that band covers taxable income up to $98,900. This is one of the largest levers an early retiree has: in years between leaving work and starting Social Security or required distributions, income is often low enough that a meaningful amount of gains can be realized at zero federal tax. Rightmont computes gains at the bracketed rate rather than a flat one, so a projection reflects the 0% band where it genuinely applies. Note that Roth conversions and gain harvesting compete for the same bracket space — using it for one means it is not available for the other.

No. We model gains and cost basis, but we do not model harvesting losses to offset them, and we do not model the wash-sale rule. Projections therefore do not include any benefit from a loss-harvesting strategy.

By default, the conventional order: cash and high-yield savings first, then taxable brokerage, then pre-tax 401(k) and Traditional IRA, then Roth last. This is the order taught most widely, and it keeps tax-advantaged accounts compounding longest. You can switch to a tax-optimizing order in Assumptions, which withdraws from pre-tax accounts up to the top of a target bracket (12% by default) before selling taxable assets.

Because strictly deferring pre-tax withdrawals lets that balance compound until required minimum distributions force large withdrawals from age 73 — often taxed at a HIGHER rate than you would have paid earlier. Deliberately withdrawing up to the top of a low bracket in low-income years levels your lifetime marginal rate and shrinks those future required distributions. The trade-off is real and it is not free: you pay some tax sooner, and in a year where your gains would have fallen in the 0% capital gains band, filling an ordinary bracket instead costs money up front. That is why Rightmont defaults to the conventional order and makes this a choice, and why each year states what it did and why.

Your contributions, yes — at any age, for any reason, with no tax and no penalty. A Roth is not one pot: the IRS ordering rules take your own contributions out first, and only once those are exhausted do you reach earnings, which before 59½ are taxed as ordinary income and hit with a 10% penalty. This is what makes a Roth usable as an early-retirement bridge, and it is the mechanism behind the Roth conversion ladder. Rightmont applies these ordering rules, so it will not penalise a withdrawal that comes out of contributions — but it needs to know your contribution basis. If you leave that at zero we treat the whole balance as earnings, which OVERSTATES the penalty.

Yes — both clocks, which are separate rules that are often confused. The first is a single clock running from your FIRST contribution to any Roth; until five years have passed, earnings are taxable even after 59½. The second applies to each CONVERSION individually: money you converted carries its own five-year clock, and withdrawing it inside that window before 59½ triggers the 10% penalty — though no income tax, because it was already taxed when you converted. Once the clock matures, or once you pass 59½, it comes out free. That is the Roth conversion ladder, and Rightmont computes it rather than just describing it: enter your prior conversions and it will show which are seasoned. One distinction worth holding onto: the 10% penalty depends on your AGE alone, while the five-year clock decides whether earnings are TAX-FREE. Someone aged 65 whose first Roth is two years old owes income tax on earnings but no penalty.

More than almost anyone budgets for, which is why Rightmont models it as its own line rather than burying it in your spending. Retiring before 65 means no employer plan and no Medicare, so you buy your own coverage at full price until Medicare begins. That gap is usually the most expensive healthcare of your life, and it lands in the years your portfolio can least afford it. Rightmont models three stages — your share of an employer premium while working, a marketplace plan through the gap, and Medicare from 65 — and inflates them at a healthcare rate you set ABOVE general inflation, because medical costs have persistently risen faster than the general price level.

The premium tax credit caps what you pay for a benchmark marketplace plan at a share of your income. That share rises with income, so the credit shrinks as you earn more — and it is measured against the federal poverty level for your household size, so a family of four qualifies at a much higher income than a single person. Above 400% of the poverty level the credit does not taper: it disappears entirely. That is the cliff, and it means one extra dollar of income can cost you an entire year's credit. The enhanced subsidies that removed the cliff expired at the end of 2025, so Rightmont models current law with the cliff in place, and lets you model an extension instead — because whether Congress restores them is a policy question we should not answer for you.

Yes, and this is the trap that catches early retirees. Money you pull from a pre-tax account is income, income raises your MAGI, and MAGI is exactly what the subsidy is measured against. Near the 400% cliff a modest withdrawal can forfeit the entire credit — an effective marginal cost far above any tax bracket. Rightmont's tax-optimizing withdrawal strategy accounts for this directly: before it fills a low bracket it prices the subsidy that withdrawal would destroy, and declines when the credit is worth more than the tax saved. Without that check a plan can report a tax saving while quietly losing money. The subsidy is also reconciled at year end against your actual income, the way Form 8962 does, so an excess advance credit is repaid rather than silently kept.

One thing worth knowing: below 100% of the poverty level we show no premium credit at all; most states would offer Medicaid instead, so that case is deliberately conservative and overstates your cost. We also interpolate the schedule that sets your expected contribution rather than using the published bracketed table — close, but not exact. Premium figures are estimates you should replace with real quotes for your state, age and plan.

IRMAA is a surcharge on Medicare Part B and Part D premiums for higher incomes, and what makes it a trap is the timing: it is set from the income on your tax return from TWO YEARS earlier. A Roth conversion at 63 raises your Medicare premium at 65, long after the decision can be undone. It is also a cliff at every tier rather than a taper — one dollar over a threshold raises your premium for the whole year. Rightmont models it from the published Social Security tables with the real two-year lookback, so you can see a surcharge coming before you trigger it rather than after.

Yes — all three legs of the triple tax advantage. The contribution is deducted above the line, so it reduces your taxable income the same way a pre-tax 401(k) does; the growth is never taxed; and a qualified medical withdrawal is never taxed either. Contributions are capped at the IRS limit for your coverage — self-only or family — with the extra catch-up amount from age 55, and anything you enter above the limit is reduced to it rather than accepted. Contributions stop at retirement, because enrolling in Medicare ends HSA eligibility.

Because of a fourth advantage that gets far less attention than the triple one: if you contribute through PAYROLL, the money escapes Social Security and Medicare tax as well as income tax. No 401(k), IRA or Roth does that. Below the Social Security wage base that is worth an extra 7.65% on top of the income-tax deduction. Above it, Social Security has already stopped, so the saving falls to the Medicare portion — which is why Rightmont computes the exact amount for your income instead of applying a flat rate, and shows it as "HSA Tax Saved" on the tax schedule. Contribute directly instead of through payroll and you still get the income-tax deduction, but you owe the FICA.

Both are legitimate, and Rightmont asks rather than assuming, because the choice changes your projection substantially. Treat it as a MEDICAL RESERVE and we hold the balance aside: it keeps compounding, it never funds general spending, and it carries no future tax bill, because qualified medical withdrawals are untaxed. Treat it as RETIREMENT SPENDING — sometimes called the "super-IRA" approach — and from age 65 it can fund anything, taxed as ordinary income with no penalty, exactly like a Traditional IRA; we then show the deferred tax it owes on your balance sheet. The reserve looks better on paper precisely because it assumes you have healthcare costs to spend it on, so choose the one that matches what you actually intend to do.

You can, but for a non-medical purpose it is the most expensive money you own: ordinary income tax PLUS a 20% penalty, double the 10% a 401(k) charges before 59½. Rightmont therefore never draws from an HSA before 65 to cover general spending in either mode — there is always a cheaper source, so modelling it would imply we recommend it. From 65 the penalty disappears entirely and only ordinary income tax remains. Reimbursing yourself for qualified medical expenses is untaxed at any age, and there is no deadline on doing so, though Rightmont does not model receipt-shoeboxing.

Required minimum distributions begin at age 73, following the SECURE 2.0 Act, and are computed from your pre-tax balance using the IRS Uniform Lifetime Table divisors. They are taxed as ordinary income and are forced whether or not you need the money, which is why they can push a retiree into a higher bracket than they were in while working.

Between 0% and 85% of your benefit, depending on your other income. We apply the full IRC Section 86 worksheet rather than assuming a flat share: we compute provisional income (other taxable income plus half your benefit), compare it against the two thresholds, and cap the taxable portion at 50% or 85% accordingly. Many tools simply assume 85% is taxable, which overstates tax for lower-income retirees.

No, and the difference matters. A pension is 100% taxable as ordinary income. Social Security is taxable only in part — between 0% and 85% of the benefit, depending on your other income under the IRC Section 86 worksheet. Rightmont reports them separately and taxes them differently. Your pension also counts as "other income" when determining how much of your Social Security becomes taxable, so a larger pension raises your tax twice over: once on the pension itself, and again by pushing more of your benefit into taxability. State treatment varies widely and we do not model it — many states exempt some or all pension income, so the state portion of a retiree's projection is likely to be overstated.

Withdrawals from pre-tax retirement accounts before age 59½ are generally taxed as ordinary income plus a 10% early-withdrawal penalty, and Rightmont applies that penalty (approximated at age 60) when a projection requires an early withdrawal. We do NOT model the penalty-free exceptions — the Rule of 55 or SEPP/72(t) substantially equal periodic payments — so an early-retirement projection may show more penalty cost than a household using those routes would actually pay. The tax-optimizing withdrawal order never chooses an early withdrawal, since paying a 10% penalty to save a lower rate would be counterproductive.

Yes. We enforce the current IRS elective deferral limit ($24,500 for those under 50), the age-50 catch-up ($32,500 total), and the SECURE 2.0 enhanced catch-up for ages 60 through 63 ($35,750 total). If your inputs would exceed a limit, the projection caps the contribution rather than silently modeling an impossible one.

We publish this deliberately. Not modeled: rental property income and depreciation, the Net Investment Income Tax, the Alternative Minimum Tax, itemized deductions (we use the standard deduction), qualified charitable distributions, tax-loss harvesting, the Rule of 55 and SEPP, progressive state brackets, and state retirement-income exclusions. RSU vesting IS modeled — ordinary income at vest, capital gains from the vest-date basis on a later sale — but 83(b) elections, stock options (ISO/NQSO) and the AMT they can trigger, and ESPP discounts are not. If a strategy on that list matters to your situation, treat the projection as a baseline and consult a tax professional.

No. Rightmont models federal tax mechanics and a blended state rate to project outcomes under current law. It is not tax, legal, or investment advice, individual situations vary, and tax law changes. Use it to compare decisions and understand the shape of a trade-off, not to prepare a return or make a filing decision.