Are taxes going to be your single biggest financial concern in retirement? A ravenous velociraptor stalking your financial security? Many pundits say so. Or, are taxes just another expense, and by no means your largest one?
Despite their scary reputation, I don’t worry about taxes much. I laid out the reasons why — my political and financial analysis of tax rates for middle-income retirees — in an article last year. That post was a bit controversial. Seems it’s not politically correct to be ambivalent about taxes!
Politics notwithstanding, if you’re able to live on less than about $6,000/month or $72,000/year in retirement — as more than 70% of my readers expect to do — then income taxes are unlikely to be a deciding factor in your finances. The U.S. Census Bureau reports, as of 2012, that the median household income was a bit over $51,000 — taxes will be even less of a factor at that level. Below I’ll show why, with examples from our own tax return.