Taxes Can Take a Big Bite Out of Retirement Income
Another big problem retirees face is a larger-than-expected tax bill on their retirement income. “Everyone thinks their tax rate will go down when they’re retired,” Geary said. “That’s a misconception.”
If you’ve saved most of your money in a tax-deferred retirement account such as a 401k, you will have to pay taxes on your withdrawals at your regular income-tax rate. So if you need, say, $50,000 a year to cover expenses, you’ll have to withdraw even more than that to cover taxes.