What Will Your Tax Rate Be In Retirement?

During all of our working years, almost all of us pay something in taxes. Call it an income tax, call it social security tax, call it employment tax; at the end of the day, money you involuntarily pay to a government is a tax, regardless of its label.

Predicting your tax rate in retirement can be difficult because forecasting your income, what investments you’ll sell, from which accounts you’ll sell those investments, and your dividend and interest income creates a sometimes complex mix of factors.

So planning through various scenarios can be enlightening as you develop a strategy to manage your taxes in retirement.

What Will Your Tax Rate Be In Retirement?

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There is no single “right” answer as to what your tax rate will be in retirement. Several factors impact your tax rate.

Variables That Impact Your Tax Rate

The first factor that impacts your tax rate is how much income you make during your working years. In retirement, this shifts to how much taxable income you need to generate to meet your spending needs.

Higher Income, Higher Income Tax Rates

The next thing that determines your tax rate is your marital status. The same amount of income will generally be taxed at lower rates in households married and filing jointly than for single taxpayers.

Single vs. Married Filers

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