Most of us believe that everything we know about taxes is accurate. Although inaccurate knowledge about taxes that does not affect our taxes does not hurt us, it can be damaging to believe tax myths as facts when dealing with the IRS or planning for the future.
Many taxpayers believe that post-retirement, they will not need to pay taxes. It is a misconception that can lead people to save less during their working years. Even though the government provides credits and other tax relief benefits to the elderly, life post-retirement is not free from taxes. For example, if you withdraw money from your retirement funds, you will need to pay taxes on the withdrawals.
Your income figures during your working years form the basis of how much taxes you pay after retirement. If you fall under the low-income group, then you may expect to get relief from taxes. To plan your post-retirement life, know how much taxes you will be paying. According to experts, you need at least 70% of your income during working years to be able to retain the lifestyle that you are accustomed to.
When planning your finances, it is advisable to use the help of a tax professional so that you prepare for your future using the right information. Even though a year’s taxes might not seem much, adding them up for years makes a substantial amount that can affect your financial stability in the future.