Other Sources of Retirement Income--and Taxes

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Other Sources of Retirement Income--and Taxes

Many retirees rely on some fixed sources of income—things like Social Security, pensions, or annuities. The more fixed sources of income you have, the lower your withdrawal rate from your portfolio can be.

Inflation is your enemy

The only trouble with fixed sources of income: inflation. Unless your fixed sources of income inch up as inflation does, you’ll need to adjust your withdrawal rate over time to compensate for the income "lost" to inflation.

How to calculate

Enter your fixed sources of income on the income worksheet. Add them to your withdrawal amount from the first year.

Let’s assume a $30,000 withdrawal per year. If you expected to receive $12,000 per year from Social Security and another $10,000 per year from your pension, you would have total pretax income of $52,000—your withdrawal plus Social Security and pension payments.

Subtract taxes

Of course, that’s before taxes. Subtract the amount you owe in taxes from your total income on the worksheet. This figure is the total income you’ll have your first year in retirement after taxes.