08/17/2026
I hear alot about people who are worried about Required Minimum Distributions, or paying taxes in retirement. Something like: "I don't want a big pre-tax balance, RMDs are going to crush me in taxes later."
The instinct to avoid forced taxes is right. But when you run the numbers, it usually doesn't hold up. And that fear is quietly pushing a lot of pre-retirees to over-Roth. The youth are calling it "Roth-maxxing"
What most people miss: you save on the way in at your marginal rate. You pay on the way out at your effective rate. Those are not the same number.
Take someone earning $150,000 a year, married filing jointly. Every dollar they defer into a 401(k) or traditional IRA saves them 22 cents in federal tax, off the top, at their marginal rate.
Now fast-forward to retirement. Say RMDs force that same person to pull, oh, $150,000–$175,000 out of the account in a given year. That withdrawal fills up the 10%, 12%, and part of the 22% bracket starting from zero, landing at roughly a 10–12% effective federal rate.
22% saved going in. 10–12% paid coming out. That's a real, durable tax edge as good as a market return. It comes purely from understanding how brackets work, not from any clever strategy.
For scale: to actually reach a 22% effective rate (not marginal) on withdrawals, a married couple would need to pull something like $565,000+ out of pre-tax accounts in a single year, under today's brackets. Most RMDs don't come close. Ironically, over "Roth-maxxing" via Roth conversions in retirement erodes the edge from making pre-tax deferrals in the first place!
None of this is a knock on Roth accounts, they absolutely have a place. But "I'm afraid of RMDs" isn't, on its own, a reason to pay more tax today than you have to. Understood correctly, this math should make you less afraid of a pre-tax balance, not more.
Marginal vs. effective. Not exciting. Might be the most underrated (and misunderstood!) concept in retirement tax planning.
