The Right Formula (It’s Easier Than It Looks)
If your total withholding rate is R (as a decimal), you keep (1 − R) of every dollar distributed.
So to hit a desired net (after withholding), you must solve for gross:
- Convert your withholding to a decimal (e.g., 28% → 0.28).
- Subtract from 1 (1 − 0.28 = 0.72).
- Divide your desired net by that result.
Worked Example
Goal: Net $5,000 after tax.
Total withholding rate: 28% (0.28 as a decimal)
- 1−0.28=0.72
- $5,000÷0.72=$6,944.44
Answer: Request a gross distribution of about $6,944.44.
- Tax withheld (28%): $6,944.44×0.28=$1,944.44
- Net to you: $6,944.44−$1,944.44=$5,000.00
Tip: If you prefer whole dollars, round up the gross so you still meet or slightly exceed your target net after withholding rounds to the nearest cent.
The Common Mistake (and Why It Fails)
Many people start with the net amount and add the tax, like this:
- $5,000×0.28=$1,400
- $5,000+$1,400=$6,400
But when tax is withheld from the gross, you actually get:
- Withholding: $6,400×0.28=$1,792
- Net: $6,400−$1,792=$4,608
That’s $392 short of the $5,000 you needed. The fix is to divide by (1 − rate), not add tax to the net.
Try the Calculator
Use our simple calculator to do this instantly—enter the net you want and your total withholding rate, and it computes the required gross along with the tax withheld.
Quick Steps You Can Memorize
- Convert your total withholding rate to a decimal (e.g., 22% → 0.22).
- Subtract from 1: 1−0.22=0.78
- Divide your desired net by that result: Gross=Net÷0.78
- (Optional) Round up your gross to whole dollars to protect your net target after cents-level rounding.
FAQs
What “withholding rate” should I enter?
Use the total rate you expect to be withheld from this distribution (e.g., federal + state + any local). The calculator treats this as a single combined rate.
What about IRA default withholding rules?
Custodians often apply default federal withholding (e.g., 10%) unless you elect otherwise, and some states have their own rules. This tool is just math—it doesn’t enforce custodian or state defaults.
Does this replace tax advice?
No. This is an illustration tool. Your personal tax situation may differ. Please consult your tax professional.
Plan Better with RBC
If you’re taking regular withdrawals, getting the net right is just the start. The Retirement Budget Calculator helps you model cash flow, taxes, Social Security timing, Roth conversions, and more—so your plan supports your lifestyle with confidence.
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Disclosure: This content is for educational purposes only and is not tax, legal, or investment advice. Consult your tax professional for guidance specific to your situation.
