Many retirees do a pretty good job of figuring their expenses for the after-work years. What many forget, though, is to allow for taxes. Taxes are a fact of life even in retirement.

Consider, for instance, the tax-deferred retirement accounts. Now is when those taxes were deferred to. A federal schedule lists how much you must take out and pay taxes on each year, depending on age. Pensions and annuities require taxes, too.

Some Social Security benefits are also subject to income tax, depending on provisional income: adjusted gross income plus tax-free interest plus 20 percent of the Social Security benefits. Half to 85 percent of benefits may be taxable.

All that’s why Roth IRAs look so good. No taxes are due on withdrawals—and no withdrawals have to be taken. Indeed, many young workers have opted for Roth 401(k)s, figuring that tomorrow’s tax savings are worth more than today’s deductions.

For nearly 30 years, Mike Nickerson has owned and managed a small, full-service accounting practice in the Midcoast. He holds a bachelor's degree in accounting from University of Southern Main and a master's degree in financial planning from Bentley University.

He is a past board member and president of the Maine Society of Certified Public Accountants and currently serves on the Maine Board of Accountancy.

An aged rock musician, Nickerson now finds musical enjoyment playing upright and electric bass in a variety of bands spanning folk to jazz music genres. He and his wife have three grown children, and they enjoy their free time hiking, kayaking, golfing, bicycling and motorcycling.

http://www.nickersonpa.com/