Tax Calculator
Tax-Efficient Withdrawal Calculator (Arizona): What It Calculates and How to Read the Result
Quick answer
For Arizona retirees with a mix of taxable, traditional IRA, and Roth accounts, the optimal withdrawal sequence depends on your bracket trajectory, your projected RMDs, and Arizona's 2.5% flat state income tax. The 'taxable first' default rule is rarely the optimal answer at $1.5M+ in assets — most households benefit from a blended approach that fills lower brackets each year deliberately.
Simplified
- Tax drag / lifetime taxes: ~424,324
- Strategies are breakeven (within ±2%). Sensitive to assumptions.
- High lifetime tax drag (>$250k cumulative taxes).
Schedule a Strategic Fit Interview to validate assumptions and prioritize improvements.
No commitment. No sales agenda. 30 minutes with a flat-fee CFP & Enrolled Agent.
| Year | Age | Strategy | RMD | QCD | Net Need | Gross Taxable | Gross Pre-Tax | Gross Roth | Taxes | End Taxable | End Pre-Tax | End Roth | End Net Worth |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 1 | 63 | Taxable → Pre-Tax → Roth | $0.00 | $0.00 | $180,000.00 | $180,000.00 | $0.00 | $0.00 | $0.00 | $415,800.00 | $1,272,000.00 | $424,000.00 | $2,111,800.00 |
| 2 | 64 | Taxable → Pre-Tax → Roth | $0.00 | $0.00 | $180,000.00 | $180,000.00 | $0.00 | $0.00 | $0.00 | $233,442.00 | $1,348,320.00 | $449,440.00 | $2,031,202.00 |
| 3 | 65 | Taxable → Pre-Tax → Roth | $0.00 | $0.00 | $180,000.00 | $180,000.00 | $0.00 | $0.00 | $0.00 | $52,907.58 | $1,429,219.20 | $476,406.40 | $1,958,533.18 |
| 4 | 66 | Taxable → Pre-Tax → Roth | $0.00 | $0.00 | $180,000.00 | $52,907.58 | $168,334.33 | $0.00 | $41,241.91 | $0.00 | $1,336,537.96 | $504,990.78 | $1,841,528.75 |
| 5 | 67 | Taxable → Pre-Tax → Roth | $0.00 | $0.00 | $180,000.00 | $0.00 | $238,410.60 | $0.00 | $58,410.60 | $0.00 | $1,164,015.01 | $535,290.23 | $1,699,305.24 |
| 6 | 68 | Taxable → Pre-Tax → Roth | $0.00 | $0.00 | $180,000.00 | $0.00 | $238,410.60 | $0.00 | $58,410.60 | $0.00 | $981,140.68 | $567,407.64 | $1,548,548.32 |
| 7 | 69 | Taxable → Pre-Tax → Roth | $0.00 | $0.00 | $180,000.00 | $0.00 | $238,410.60 | $0.00 | $58,410.60 | $0.00 | $787,293.88 | $601,452.10 | $1,388,745.99 |
| 8 | 70 | Taxable → Pre-Tax → Roth | $0.00 | $0.00 | $180,000.00 | $0.00 | $238,410.60 | $0.00 | $58,410.60 | $0.00 | $581,816.29 | $637,539.23 | $1,219,355.52 |
| 9 | 71 | Taxable → Pre-Tax → Roth | $0.00 | $0.00 | $180,000.00 | $0.00 | $238,410.60 | $0.00 | $58,410.60 | $0.00 | $364,010.03 | $675,791.58 | $1,039,801.61 |
| 10 | 72 | Taxable → Pre-Tax → Roth | $0.00 | $0.00 | $180,000.00 | $0.00 | $238,410.60 | $0.00 | $58,410.60 | $0.00 | $133,135.40 | $716,339.08 | $849,474.48 |
| 11 | 73 | Taxable → Pre-Tax → Roth | $5,023.98 | $0.00 | $180,000.00 | $0.00 | $133,135.40 | $79,482.77 | $32,618.17 | $0.00 | $0.00 | $675,067.68 | $675,067.68 |
| 12 | 74 | Taxable → Pre-Tax → Roth | $0.00 | $0.00 | $180,000.00 | $0.00 | $0.00 | $180,000.00 | $0.00 | $0.00 | $0.00 | $524,771.75 | $524,771.75 |
| 13 | 75 | Taxable → Pre-Tax → Roth | $0.00 | $0.00 | $180,000.00 | $0.00 | $0.00 | $180,000.00 | $0.00 | $0.00 | $0.00 | $365,458.05 | $365,458.05 |
| 14 | 76 | Taxable → Pre-Tax → Roth | $0.00 | $0.00 | $180,000.00 | $0.00 | $0.00 | $180,000.00 | $0.00 | $0.00 | $0.00 | $196,585.53 | $196,585.53 |
| 15 | 77 | Taxable → Pre-Tax → Roth | $0.00 | $0.00 | $180,000.00 | $0.00 | $0.00 | $180,000.00 | $0.00 | $0.00 | $0.00 | $17,580.67 | $17,580.67 |
| 16 | 78 | Taxable → Pre-Tax → Roth | $0.00 | $0.00 | $180,000.00 | $0.00 | $0.00 | $17,580.67 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 |
| 17 | 79 | Taxable → Pre-Tax → Roth | $0.00 | $0.00 | $180,000.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 |
| 18 | 80 | Taxable → Pre-Tax → Roth | $0.00 | $0.00 | $180,000.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 |
| 19 | 81 | Taxable → Pre-Tax → Roth | $0.00 | $0.00 | $180,000.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 |
| 20 | 82 | Taxable → Pre-Tax → Roth | $0.00 | $0.00 | $180,000.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 |
| 21 | 83 | Taxable → Pre-Tax → Roth | $0.00 | $0.00 | $180,000.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 |
| 22 | 84 | Taxable → Pre-Tax → Roth | $0.00 | $0.00 | $180,000.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 |
| 23 | 85 | Taxable → Pre-Tax → Roth | $0.00 | $0.00 | $180,000.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 |
| 24 | 86 | Taxable → Pre-Tax → Roth | $0.00 | $0.00 | $180,000.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 |
| 25 | 87 | Taxable → Pre-Tax → Roth | $0.00 | $0.00 | $180,000.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 |
Spending need is after tax; withdrawals are grossed up. Taxable account uses an after-tax growth approximation: after_tax_return = r_taxable − (qualified_portion × cap_gains_rate). Realized gains on withdrawals occur only above basis.
Pre-tax withdrawals (including RMDs) taxed at your federal + state effective rates. QCDs reduce RMD income dollar-for-dollar (age ≥ 70½). Roth is tax-free.
Arizona notes: We use your effective rates and a toggle to apply state tax to capital gains for simplicity. Social Security not modeled separately; not taxed by Arizona.
This is not tax or investment advice. Consult a fiduciary advisor/CPA. Capital gains, deductions, credits, IRMAA, and SS formulas are simplified.
What This Calculator Actually Answers
This calculator models year-by-year withdrawal sequencing across your taxable, traditional IRA, Roth IRA, and (where applicable) HSA accounts for an Arizona resident. It accounts for Arizona's 2.5% flat state income tax, the federal bracket structure, Social Security taxation thresholds, IRMAA tiers, and required minimum distributions starting at 73.
The output is an annual withdrawal schedule that minimizes lifetime tax — not just this year's tax. For most Arizona households with $1.5M+ in mixed account types, the strategy involves deliberately filling lower brackets each year (often combining Roth conversions with measured pre-tax withdrawals) rather than the default 'taxable first, pre-tax next, Roth last' rule.
How to Read the Result
The schedule shows three things: which account each year's withdrawal comes from, the tax bracket impact, and the cumulative lifetime tax versus the do-nothing or default-sequence baseline. The cumulative savings figure is the strategy's value — typically $200,000–$600,000 over a 25–30 year retirement for a $1.5M+ household.
Arizona's flat 2.5% state tax means the state-tax component is the same regardless of which bracket the federal income lands in — which actually makes Arizona one of the friendliest states for aggressive Roth conversion strategy. The federal bracket structure is where most of the optimization lives.
Common Mistakes
- Following the default 'taxable first, pre-tax next, Roth last' rule without modeling the lifetime tax impact. For most $1.5M+ households this rule is suboptimal.
- Ignoring Roth conversions during the pre-RMD years. Withdrawal sequencing and Roth conversion are part of the same problem, not separate decisions.
- Forgetting Arizona's part-year residency rules if you split time with another state. The Arizona 2.5% flat tax applies to AZ-source income; non-AZ residence days affect the calculation.
- Not coordinating with capital-gain harvesting. Years where you can stay in the 0% federal LTCG bracket are valuable — but only if your bracket math lines up.
- Treating the annual decision as static. The withdrawal sequence needs to be recalculated each year as account balances, tax law, and income sources evolve.
When This Calculator Is Not the Right Tool
This calculator handles federal and Arizona tax for a single household. If you have meaningful Arizona-non-resident income (rental property in another state, partnership income from another state), or if you're a part-year Arizona resident, the calculation requires additional inputs that this tool simplifies. For complex multi-state situations, this calculator produces a useful baseline but should be validated with a tax professional.
Frequently Asked Questions
Does Arizona tax retirement income?
Arizona taxes traditional IRA, 401(k), and pension distributions at the flat 2.5% state rate (effective 2023). Arizona does not tax Social Security at the state level. Long-term capital gains and qualified dividends are taxed at federal preferential rates first, then the 2.5% AZ rate applies. There is no Arizona estate or inheritance tax.
What's the typical optimal sequence for an Arizona retiree?
There is no universal sequence — it depends on your bracket trajectory, your account balances, and your other income. A common pattern for $1.5M+ households: in the early pre-RMD years, draw modestly from taxable accounts to keep AGI low, execute meaningful Roth conversions to fill the 12% and 22% federal brackets, and let Roth accounts compound untouched for the longest possible horizon. Once RMDs begin, the schedule shifts to satisfying RMDs first and adjusting other withdrawals around them.
How much can tax-efficient sequencing actually save?
For most $1.5M+ Arizona households, the cumulative lifetime tax savings from deliberate sequencing (versus the default rule) is $200,000–$600,000 across a 25–30 year retirement. The exact figure depends on your starting account mix, bracket trajectory, and execution discipline year over year.
Should I use HSA dollars for current medical expenses or save them?
For households that can afford to pay current medical expenses from other accounts, saving HSA dollars is often the best strategy. HSA contributions are pre-tax, growth is tax-free, and qualified medical withdrawals are tax-free at any age — making the HSA the most tax-advantaged account in the U.S. tax code. Use it last in your withdrawal sequence when possible.