A common high-income early-retirement planning question is deceptively simple: “How large does my portfolio need to be to reliably support $25,000–$30,000 per month after taxes?”
The difficulty is that “after tax” depends on how you withdraw, not just how much you spend. Portfolio composition, cost basis, state taxes, dividends, interest, and health insurance can change the gross amount you must pull to net the same lifestyle.
Turning monthly spending into an annual target
Start by converting the lifestyle number into a yearly net spending range:
- $25,000/month after tax ≈ $300,000/year after tax
- $30,000/month after tax ≈ $360,000/year after tax
That is your net requirement. The gross withdrawal depends on taxes and how much of the withdrawal is taxed as ordinary income vs. qualified dividends vs. long-term capital gains.
Choosing a conservative withdrawal rate
Many people reference the “4% rule,” which is a shorthand derived from historical U.S. market backtests and a specific set of assumptions (time horizon, asset mix, rebalancing, inflation adjustments). For longer retirements—especially early retirement—people often choose more conservative planning rates (for example, 3.0%–3.5%) to better handle uncertainty.
A quick way to see the scale is to compute the portfolio needed to fund a given gross withdrawal at different planning rates. The table below is a planning illustration, not a promise.
| Annual Gross Withdrawal | 4.0% Planning Rate | 3.5% Planning Rate | 3.0% Planning Rate |
|---|---|---|---|
| $400,000 | $10.0M | $11.4M | $13.3M |
| $450,000 | $11.3M | $12.9M | $15.0M |
| $500,000 | $12.5M | $14.3M | $16.7M |
| $600,000 | $15.0M | $17.1M | $20.0M |
If your goal is to net $300k–$360k after tax, your gross withdrawal might land anywhere from roughly the low $400ks to $500ks+ depending on tax structure and other “non-obvious” costs (health insurance, state taxes, mortgage payoff timing, etc.).
Why taxes are the swing factor
“Taxes in retirement” is not a single number. It’s a result of the types of income you realize and the order you realize them in. For a household primarily funding spending from a taxable brokerage account, the main moving parts tend to be:
| Category | Why It Matters | Common Planning Notes |
|---|---|---|
| Qualified dividends | Often taxed more favorably than wages | Depends on holding period and fund structure |
| Long-term capital gains | Realized gains depend on cost basis | Two investors can sell the same dollar amount and owe very different tax |
| Bond interest | Often treated as ordinary income | Asset location (where bonds are held) can change the after-tax result |
| State income tax | Can add meaningful drag | Varies widely by state and by income type |
| Net Investment Income Tax (NIIT) | May apply above certain income thresholds | Important for higher withdrawal years |
| Health insurance & subsidies | Income can affect premiums/subsidies | Gross income management can matter as much as tax rate |
For official background reading, the U.S. IRS pages on capital gains and dividends provide the baseline definitions and general rules: Capital Gains and Losses and Dividends.
Taxes are not just “a percentage of what you withdraw.” The same net spending can require very different gross withdrawals depending on cost basis, income type, and state rules. Any single-number assumption should be treated as a temporary placeholder until modeled.
A practical “gross-up” method
If you want a usable starting point without building a full model on day one, you can use a gross-up approach:
- Pick a net spending target (e.g., $330,000/year after tax).
- Estimate a provisional effective tax rate on withdrawals (e.g., 10%, 15%, 20%).
- Compute gross withdrawal = net / (1 − tax rate).
- Compare that gross number to your portfolio size to see the implied withdrawal rate.
Here is what that looks like for $300k–$360k net:
| Net Spending (After Tax) | Assumed Effective Tax Rate | Estimated Gross Withdrawal |
|---|---|---|
| $300,000 | 10% | $333,333 |
| $300,000 | 15% | $352,941 |
| $300,000 | 20% | $375,000 |
| $360,000 | 10% | $400,000 |
| $360,000 | 15% | $423,529 |
| $360,000 | 20% | $450,000 |
Now translate gross withdrawals into an implied withdrawal rate. For example:
- $450k gross on a $15M portfolio ≈ 3.0%
- $500k gross on a $15M portfolio ≈ 3.33%
- $600k gross on a $15M portfolio ≈ 4.0%
This is why many high-asset households see that $25k–$30k/month after tax can be compatible with a 3%–4% range, but the “right” answer depends on the tax profile and the length of retirement.
Portfolio structure that changes the tax outcome
Two portfolios with the same market value can produce very different after-tax spending power. The factors below often drive the gap:
Cost basis concentration
If a large portion of your taxable portfolio is in a position with low cost basis, selling to fund spending may realize substantial gains. In contrast, a broadly diversified taxable portfolio built over time may have a more blended basis, potentially reducing realized gains per dollar sold.
Dividend yield vs. total return
Higher dividend yield may reduce how much you need to sell, but it can also increase taxable income each year. A total-return approach (dividends + selective sales) is often how spending is practically funded.
Where bonds live
Bond interest is commonly treated as ordinary income. Holding certain fixed-income exposures in tax-advantaged accounts (when available) may change the effective tax rate of your overall withdrawal plan. Municipal bonds have their own tradeoffs and should be evaluated carefully. For general background, see the SEC’s investor education materials: Bonds and Fixed Income.
State tax and residency assumptions
For large withdrawal amounts, state taxes can materially change net results. In many real plans, “where you live” becomes as important as “what you withdraw,” especially over decades.
Key risks that deserve explicit modeling
When the numbers are large, it can be tempting to treat the plan as “obviously safe.” But safety depends on the path, not just the average. These are the recurring risks that tend to matter most:
Sequence-of-returns risk
Early retirement is most vulnerable to poor returns early on, because withdrawals happen while the portfolio is down. Planning with a more conservative rate and a flexible spending policy can reduce this risk.
Spending flexibility (the real safety valve)
A “safe withdrawal rate” is not a law of nature. Households often adapt: delaying discretionary spending, pausing large gifts, reducing travel, or deferring major purchases during prolonged drawdowns. Flexibility can be more powerful than chasing a perfect percentage.
Healthcare and insurance costs
Pre-Medicare healthcare can be a major swing variable. Even when you can afford it, premium and plan choices can interact with taxable income. Treat this as a first-class line item, not an afterthought.
Concentration risk
A portfolio heavily dependent on a single company or sector can produce a net-worth figure that looks strong but behaves more like a leveraged bet. Diversification is not a guarantee, but it reduces the risk that one position determines the outcome.
Any example scenario—no matter how detailed—still leaves out personal variables: health, family needs, future housing plans, charitable goals, and risk tolerance. This is why back-of-the-envelope math should be treated as orientation, not a final plan.
How to validate your plan (without guessing)
The most reliable way to move beyond generic percentages is to model your situation with realistic assumptions:
- Tax projection based on expected dividends, interest, and realized gains (including cost basis).
- Retirement cash-flow plan that separates essential vs. discretionary expenses.
- Stress tests for early bear markets, long flat markets, and high inflation periods.
- Policy decisions written down in advance (e.g., “If portfolio drops 20%, discretionary spending falls 15%”).
If you want a neutral framework for planning discussions, the CFP Board’s consumer site offers general personal finance education: CFP Board Consumer Resources.
For many households, a limited-scope engagement with a tax professional and/or a fee-only planner can be used to validate assumptions and build a decision-ready model—without turning the process into an indefinite project.
Key takeaways
Supporting $25k–$30k/month after tax is mostly a question of gross withdrawal size and how that withdrawal is taxed. The same net lifestyle can imply very different safe portfolio targets depending on cost basis, dividend/interest mix, state tax, and insurance choices.
In planning terms, many early retirees treat 3.0%–3.5% as a conservative lens for long horizons, while acknowledging that spending flexibility and tax-aware withdrawal design often matter more than one “correct” percentage.
The goal is not to prove a single number—it’s to build a plan that remains workable across multiple market paths and life changes, and to update it as conditions evolve.
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