Key Takeaways
- A Money Matters caller and her husband, 60 and 62, are retiring with $2.7 million in tax-deferred accounts, $1.2 million in a brokerage account and $210,000 a year of pensions.
- Both were born in 1960 or later, so their required withdrawals start at 75. If the $2.7 million were one owner’s balance, the first withdrawal would be $109,756.
- Add the rental income they described to their pensions, and under 2026’s brackets only about half of $109,756 of withdrawals in one year (one owner’s, or both spouses’ once both are taking them) would be taxed at 24%. The rest would be taxed at 32%.
- Under 2027’s brackets, they could convert about $65,000 a year to a Roth before reaching the 32% bracket, less any interest, ordinary dividends or short-term gains from the brokerage account.
If you’ve saved more in a 401(k) or IRA than you’ll ever need to spend, I have some mixed news. The IRS will make you take that money out eventually, and the tax bill can be bigger than you’d expect.
A couple who called into Allworth Financial’s Money Matters podcast on its Nov. 7 episode shows how big. She’s retiring, her husband already has, and they’re 60 and 62. “We’ve got about 2.7 million in tax deferred and pensions of about 210,000 annually,” she told the hosts. A few minutes later she added: “And then we have another 1.2 in brokerage.”
Money they aren’t planning to touch
The pensions aren’t their only income. They also have about $175,000 a year of net rental income. That’s how I heard the figure on the call: “net about 175.” They both taught college, and they won’t get any Social Security.
When the hosts asked whether they’d use any of the tax-deferred money, the answer was no, not at this point. Right now it’s all in stocks. Later in the call, the couple asked what every big saver asks sooner or later: “But on top of that, then do we have to pull it out? And then are we paying taxes on it?”
Yes, and yes.
6 safe dividend stocks paying retirees 6%+ yields
There are over 100 stocks paying 6%+ annual dividends today.
But after an extensive investment review leveraging TIKR’s proprietary data, we now believe only six of them are truly safe for retirees.
They’re all yours for free as part of our new investment report, which you can access right here.
Their clock starts at 75
Under SECURE 2.0, anyone born on or after Jan. 1, 1960, starts required withdrawals at 75. At 60 and 62, both spouses fall in that group. An owner’s first withdrawal is due by April 1 of the year after they turn 75, and every one after that is due by Dec. 31.
Each year’s amount is the account’s balance at the end of the year before, divided by a factor from the IRS’s Uniform Lifetime Table. At 75, that factor is 24.6. If the $2.7 million held its value and sat in one owner’s name, the first withdrawal would be $109,756 ($2,700,000 ÷ 24.6).
But a married couple’s money isn’t all in one name. Required withdrawals are figured per owner: each spouse’s own accounts, at that spouse’s own age. Since they’re two years apart, the older spouse starts two years before the younger one. If the money were split evenly, each spouse’s first withdrawal would be about half the headline figure, two years apart. And since the money is all in stocks, the balance at 75 could be much bigger than $2.7 million, which would make the withdrawals bigger too.
In a year with $109,756 of withdrawals, about half gets taxed at 32%
Their pensions alone would take a good chunk of the brackets. Here’s how it works at 2026’s figures for married couples filing jointly. Start with the $32,200 standard deduction and add $1,650 for each spouse once both are 65. That leaves $174,500 of taxable income from $210,000 of pensions. That’s in the 22% bracket, with $36,900 of room before the 24% bracket starts at $211,400.
The rent uses up that room and more. Add about $175,000 of it, and taxable income comes to $349,500, well into the 24% bracket, which runs to $403,550. So in a year when $109,756 of withdrawals land, from one owner’s account or from both spouses’ once both are taking them, about $54,000 would be taxed at 24% and the other $56,000 or so at 32%. That’s about $30,800 of federal income tax across the two rates. Split evenly, each spouse’s first withdrawal on its own would be about $54,900, and nearly all of it would fit in that 24% room.
Nobody knows what the brackets will look like 13 years from now. Their pensions and rent will likely change by then too. Today’s figures are still the best map they have.
They have over a decade to convert at 24%
Before the older spouse turns 75, the couple has 13 years to move money out of the tax-deferred accounts on their own schedule, at rates they can see. The IRS’s 2027 figures, released Nov. 5, give them a target for next year. For married couples filing jointly, the 32% bracket starts above $416,650 of taxable income, and the standard deduction rises to $33,200.
With $210,000 of pensions and about $175,000 of rent, their 2027 taxable income would be $351,800 before any conversion. That leaves $64,850 they could convert to a Roth at 24% before hitting 32%. Interest, ordinary dividends and short-term gains from the $1.2 million brokerage account would use up part of that room; qualified dividends and long-term gains stack on top, at their own rates. Every dollar converted is a dollar off the balance their required withdrawals are figured on.
The hosts suggested doing both: some Roth conversions, and spending down some of the brokerage account. I think that’s the right call. Here’s where I land: a couple who’d pay 24% on a conversion now, and 32% on part of their required withdrawals later, should use the years before 75 to fill the 24% bracket. Of course, 2027’s brackets are the only future ones we know so far. If their all-stock portfolio keeps growing, the withdrawals at 75 will be bigger than $109,756 no matter what.
Enjoy your retirement in style with these safe 6%+ dividend yields
Dividends can hold the key to enormous wealth. But only if you buy the right ones.
Picking the right high-yield dividend stock can be the difference between a dream retirement…and scraping by every month, waiting for the next Social Security check to clear.
We’ve identified six stocks yielding 6%+ that we believe every retiree should know about right now.
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
