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Be careful. Are you sure of your answer?
Most people say “Lower”, but in reality, things can occur that often keep your tax bracket the same or even increase. What causes this to happen? The loss of all the deductions you experienced during your working years.
Let’s take a look at the top 4 deductions a typical American takes while working:
Mortgage Interest – By far the number one source of deductions for those who itemize, but most retirees strive to pay off their mortgage to be free of those payments. This also makes them free of the largest deduction.
Children – This is a double whammy because your children count as an exemption and as a credit. The exemption is a dollar-for-dollar reduction in your taxable income while the credit is a dollar-for-dollar reduction in your tax bill. But the kids grow and move away.
Retirement Plan Contributions – Once you have retired, you are no longer contributing funds pre-tax to employer sponsored programs. This one is now gone for you, too.
Charity – This is one that is more likely to remain, but now living on a “fixed” income, charitable contributions often go down or go from sending a check to actually volunteering. Volunteering is noble, but it is not deductible.
What does this all mean? Higher tax brackets because of fewer deductions!
Let’s take a look at www.ifcadvisors.com/tax-free/