Calculating how much of your particular benefit is taxable is relatively straightforward. Since your combined income exceeds the $34,000 limit by more than your total benefit, you can simply multiply your Social Security payment by 0.85. As a result, $32,416 of your benefits are taxable.

Keep in mind that just because a person’s combined income exceeds the $34,000 limit, that doesn’t mean 85% of their benefit is automatically taxable. Instead, it depends on how much their combined income exceeds the $34,000 threshold.

Consider a hypothetical retiree named Jim who has a full benefit of $30,000 and a combined income of $40,000. Although his combined income exceeds the upper limit, only $9,600 of his Social Security would be taxable. So how’d he get there?

First, he would multiply $9,000 by 0.5 and get $4,500. That’s because his combined income fills up the first tax bracket ($25,000-$34,000). And since Jim’s combined income is $6,000 over the $34,000 limit, he’d then multiply that number by 0.85 and get $5,100. Adding those two figures together – $4,500 + $5,100 – gives Jim the total amount of his Social Security that’s subject to taxes: $9,600.

If you need additional help calculating how much of your benefits are taxable, speak with a financial advisor.

Now we can put it all together and calculate how much you’ll roughly pay in taxes based on the assumptions we’ve made.

Just add your $57,080 taxable income to your $32,416 of taxable Social Security benefits and you get $89,496. We still get to take some deductions. You may have itemized deductions, but rather than guess what those might be we’ll assume you are single and at least 65 years old and you are taking the 2023 standard deduction of $15,700 (people 65 and older can take a higher standard deduction):

$89,496 – $15,700 = $73,796

This is the amount that your tax bill will be based on. Now, let’s review the federal income tax brackets for 2023 to see where you stand. Remember, the federal income tax is progressive, meaning you’ll pay higher rates as your income increases.

• Your first $11,000 of income is taxed at 10%, so you’ll owe $1,100.

• Income that falls between $11,000 and $44,725 is taxed at 12%. You fill that bracket up, so you’ll owe $4,047 in taxes on this segment of your income ($33,725 x 0.12).

• The remaining portion of your income ($73,796 – 44,725 = $29,071) is taxed at 22%, so you’ll owe another $6,396.

Add it all up to get a total tax bill of $11,543. Remember, this figure is based on the information you provided and the assumptions we made. This likely won’t be your actual tax bill, but it’s far closer than a random guess and should at least give you an idea of how to calculate it. (Calculating and managing your taxes in retirement can be complicated, but a financial advisor can help.)

This gives you a rough idea of where you stand with some basic assumptions. However, there are several things not present here that may impact your tax liability. You may have state and local taxes depending on where you live. Not only do these create additional tax liability, but they may provide you with a deduction on your federal return. Other items may also be relevant, such as deductible mortgage or student loan interest for example.

• Retirement planning can be complex and overwhelming, but a financial advisor can helpful. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

• Building a retirement income plan starts with estimating your expenses and figuring out how much income you’ll to meet them. Experts recommend replacing anywhere from 55% to 80% of your pre-retirement income with Social Security, retirement account withdrawals and other sources. T. Rowe Price, meanwhile, recommends you aim to replace 75% of your pre-retirement income and then adjust your replacement rate up or down rate based on your savings and spending expectations.

• Keep an emergency fund on hand in case you run into unexpected expenses. An emergency fund should be liquid — in an account that isn’t at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.

• Are you a financial advisor looking to grow your business? SmartAsset AMP helps advisors connect with leads and offers marketing automation solutions so you can spend more time making conversions. Learn more about SmartAsset AMP.

Brandon Renfro, CFP®, is a SmartAsset financial planning columnist and answers reader questions on personal finance and tax topics. Got a question you’d like answered? Email AskAnAdvisor@smartasset.com and your question may be answered in a future column.

Please note that Brandon is not a participant in the SmartAsset AMP platform, nor is he an employee of SmartAsset, and he has been compensated for this article. Questions may be edited for clarity or length.

Photo credit: ©iStock.com/Inside Creative Housel, ©iStock.com/Thapana Onphalai

The post Ask an Advisor: I Have $800k in a 401(k) and $5,270 in Monthly Income From Social Security and My Pension. How Much Will I Pay in Taxes in Retirement? appeared first on SmartReads by SmartAsset.