Is assuming 12% tax a fair assumption in FIRE for my situation?

[Huffduf41]

I've been reading FIRE material and saving like a mad man since leaving university.  One thing that I've slacked on is becoming educated in how taxes work in FIRE but now that covid took a massive dump on the job that I mostly enjoyed its time to start learning.  I've been reading thru the stickies but learn best by examples so seeing if you can help me out, if it matters I'm in my early 40s, have a wife and two young children.

In order for the fam and I to maintain our current lifestyle we need about $100k/year.  This will be funded by a $3M portfolio w/ the following breakdown:

401k        $700k
IRA         $1.15M
Roth IRA   $700k
Taxable     $350k
HSA           $80k

I'm assuming that I'll be paying some state taxes (Michigan), do you guys think that 12% is close?  Thanks

[honeyfill]

Your worst case taxes would be if you pulled everything from your IRA/401k.  For a MFJ with 2 dependents, If you pulled 107,000 you would pay 5664 in federal taxes.
Lets assume you would pay 1336 more in Michigan taxes. (Just guessing)
that would leave you 100,000 for expenses and your tax rate would be 6.54%.

So you are safely under 12%

[Much Fishing to Do]

I think 12% may be about right as far as being conservative to not only allow for your credit losses when the kids leave the nest but also b/c your state tax may be almost as high as federal as I think Michigan is gonna tax all or most  401k/ira distributions and all capital gains etc at the flat 4.25% rate before you hit "true" retirement age.  I think its even more complicated than that, so do a little research into MI taxes when coming up with your withdrawal strategy.

I'm in PA and between the large percentage I have in Taxable accts plus the cap gains zero bracket I'm gonna pay very very little in federal but I will be paying more in state (the flat 3%).

[MDM]

Are you asking about "effective tax rate" or Marginal tax rate?

See also Marginal Vs Effective Tax Rates And When To Use Each.

[Huffduf41]

Effective tax rate.