The context of this question is looking at retirement and 401k/Roth. I am currently contributing to both. I was wondering when I start withdrawals of the traditional if these withdrawals are taxed at the lowest tax brackets. The Roth as I understand it is post tax so no tax there. However, the traditional would be quite different if applied against the brackets of the lower income vs. the higher income (if the Roth is considered income against the lower tax brackets).

Basically I'm asking about how the taxes work (what tax brackets apply) when taking income from both at retirement.

1 Answer 1


Roth distributions will not count against your income, since contributions have already been taxed, and earnings are not taxable. If you have $1,000,000 in your Roth, you can withdraw it all as a lump sum, tax-free (assuming penalty-free withdrawal).

Traditional 401K/IRA distributions count as income.

You asked what bracket these distributions are "applied against", but this is not really the way the tax system works. Your distribution income gets combined with your other forms of income, minus credits, deductions, etc. to come up with your Taxable Income, which is used to determine how much tax you pay.

That's a highly simplified explanation--I think a full discussion of the federal tax system might be too much for this question, but reading up on Marginal Tax Rate should help.

The question of the benefits of Roth vs. Traditional is also a very complex question/calculation, and involves a slew of inputs, many of which are purely speculative (e.g. expected federal tax rate in 30 years).

  • +1 but, since this income is the variable, and can often be adjusted up or down, I consider it to be the last income taxed, ie its all taxed at the marginal rate. Using an average rate is misleading, in my opinion. Mar 24, 2014 at 15:12
  • +1 but note that you are correct when you say that Roth distributions are not part of the taxable income but not quite correct in saying that the reason is that because they have already been taxed. Only the contributions to the Roth plans are post-tax income; the growth (if any) due to the earnings and capital gains in the Roth account has not been taxed but is tax-free when withdrawn (post 5 years/59.5 age etc) as a matter of law, which might very well change in the future. Mar 24, 2014 at 15:13
  • Updated to better explain the Roth. Mar 24, 2014 at 15:38
  • 1
    To check my understanding - This means based on the marginal tax rates found in your link, that hypothetically: if I withdrew $8000 in 2013 from my Traditional 401k and $50,0000 from my Roth I would only pay 10% tax on the 8,000$ of taxable income. (At time of withdrawal, assuming conditions met for penalty free withdrawal, etc) Is this correct? Mar 24, 2014 at 15:59
  • That's more or less right. That assumes that you have no other income for that year, and that you get no deductions or credits whatsoever (which is never the case). Mar 24, 2014 at 16:09

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