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The Second Bill
The same retirement plan can be taxed four very different ways on the way out. See the spread on yours.
What It ShowsThe Second Bill calculator shows the total federal income tax on a pension, cash balance plan or pre-tax 401(k) under four exits: over 10 years while still working, as a lump sum, by heirs over 10 years, and over 20 years in retirement, plus the spread between the best and worst.
Pension Exit Calculator
The Second Bill
The same pre-tax balance can create four very different federal tax bills depending on how it comes out.
Federal tax only. State tax is not included.
What This Assumes
- Federal income tax uses 2026 ordinary-income brackets and the standard deduction.
- State income tax, plan growth, penalties, credits, deductions, and required minimum distributions are not modelled.
- Each exit is a simplified illustration: equal annual withdrawals for the 10- and 20-year cases, with no other income except where entered.
- The heirs case assumes the balance is distributed evenly over 10 years and taxed at the selected filing status.
What Moves This Number Most
Timing and other income in the withdrawal years move this number most. Taking more of the plan while other earnings are high pushes more dollars into higher federal brackets; spreading withdrawals across lower-income years can reduce that effect.
Illustrative estimate for education, not tax, legal or investment advice. Results depend on your full situation; review with your CPA before acting.
19th Hole FinancialHow It Works
Inside The Calculator
Who It Is For
Business owners with a defined benefit or cash balance plan, and anyone with a large traditional 401(k) or IRA, who wants to see how much the exit itself changes the tax. It answers one question: how different is the bill depending on how the money comes out?
The Three Inputs
- Plan balance
- What is in the pension, cash balance plan or pre-tax 401(k) today. It opens at $2,495,309, the median employer's plan assets in public Department of Labor Form 5500 filings.
- Filing status
- Married filing jointly or single. The same status is used for every exit, including the heirs row.
- Other income while working
- Your other taxable income if you withdraw while still earning. It only affects the first exit.
How The Four Exits Are Modelled
- Over 10 years while still earning: a tenth of the balance each year, stacked on top of your other income and taxed at the margin.
- Lump sum: the whole balance in one year with no other income.
- Heirs over 10 years: a tenth each year to a beneficiary with no other income, which mirrors the 10-year rule most non-spouse heirs now face.
- Over 20 years, retired: a twentieth each year with no other income.
Each uses 2026 federal ordinary-income brackets and the standard deduction. The spread is the gap between the most and least expensive exit.
A Worked Example
A married owner with a $1,000,000 plan and $300,000 of other income. Withdrawing over ten years while still working costs $240,000 in federal tax. A lump sum costs $280,251. Heirs with no other income would pay $76,400, and a twenty-year retirement drawdown $35,600. Same plan, a $244,651 spread, and state tax would widen it.
What It Leaves Out
State income tax, investment growth, required minimum distributions, the 10% additional tax on most withdrawals before age 59½, credits and deductions. The heirs row assumes the heirs have no income of their own; if they are high earners, their bill can be the largest of the four. The Second Bill guide walks through what the example does and does not mean.
About This Calculator
What is the Second Bill?
The Second Bill is the income tax due when money comes out of a pension, cash balance plan or pre-tax 401(k). You deducted the contributions; the withdrawals are taxed as ordinary income. How and when they come out decides how big the bill is.
Where does the $2,495,309 example come from?
It is the median employer's total plan assets across public Department of Labor Form 5500 filings for defined benefit plans. Every number shown is computed from 2026 federal brackets, with no growth modelled.
Why is state tax left out?
Because a flat state rate would be wrong for most people. The calculator shows federal tax only, so the real bill in a state like California is higher.
Can I avoid the tax by rolling the plan into an IRA?
A rollover defers the tax but does not remove it. The balance is still pre-tax and still faces the Second Bill when it is withdrawn, including required minimum distributions later.
Want The Real Scorecard?
The calculator is a starting point. In the third meeting Tyler builds your full Tax Advantage Scorecard and the game plan that brings the numbers down.
- 30 minutes on Zoom
- No preparation needed
- Bring your CPA or spouse if you like