How Retirement Withdrawals May Affect Your Tax Bracket

The bigger your retirement account withdrawals, the higher your tax bracket will be in retirement. The good news is that you may owe fewer taxes in retirement than when you were in the workforce. There are no Social Security payroll deductions from your retirement account withdrawals. Everyone should have a plan to mitigate the tax hit on their retirement income streams.

How Many Tax Brackets And Rates Are There?

There are currently seven federal tax brackets. As you earn more money, you will move into higher tax brackets and owe more taxes on the next dollar earned. Current federal tax rates range from 10 to 37%. The tax bracket that you fall into will depend on your household taxable income and marital status.