Budgeting Mistake: Failing To Consider Your Taxes

Benjamin Franklin once said that “nothing is certain except death and taxes.” So remember that just because you retire doesn’t mean your taxes will cease to exist.

When you’re planning for your golden years, you need to stay on top of the taxes you’ll have to pay on distributions from your retirement accounts. Regarding traditional 401(k)s and IRAs, retirement withdrawals will be taxed as ordinary income.

The amount you will need to pay in taxes will depend on your tax bracket in retirement. Even if you think that your marginal tax rate will be lower in retirement than it is now, it’s essential to plan for these tax payments, so that they don’t catch you off guard.