Common Mistake of Overestimating Your Tax Rate in Retirement

 Erik Carter  Financial Finesse  Source: http://www.financialfinesse.com/blog/author/ecarter/

Erik Carter

Financial Finesse

Source: http://www.financialfinesse.com/blog/author/ecarter/

Overestimating your tax rate can have a big impact in one's retirement planning in terms of how much income you'll need to retire and whether to make a Roth or pre-tax contribution. In talking with Retirement News Today, Erik Carter, Senior Resident Financial Planner with Financial Finesse, says getting a sense of how much income you're actually going to need during retirement, such as whether your mortgage will be paid off, is important.  He says it's also important to have an understanding that not all of your retirement income is taxable, such as social security, money coming out of Roths or money coming out of saving and investment principal.

Carter says it's also important the difference between your marginal tax rate and your actual effective tax rate and that the actual effective rate is lower.  Tax planning is a huge part of retirement planning because it will, for a lot of people, be the biggest expense of retirement so when trying to estimate needs, you want to be sure to get it right, Carter suggests.

Erik Carter, Senior Resident Financial Planner with Financial Finesse, spoke with Retirement News Today, providing online retirement news video content.  Retirement News Today is a featured network of Sequence Media Group.

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