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Hi there, I hope someone could help me. I am trying to figure out what percentage to use for the tax effect percentage that I should apply when calculating the amount that an IRA should be discounted. I say 20% to use on all pre tax account. I know it depends on the individual accounts, but my husband will probably not go for that. So I wanted to be able to use a standard percentage. Although he is in a very low tax bracket and I am in a high tax bracket, I am getting the short end of the deal. But, he will not go for using a lower percentage on his pretax accounts vs mine. Any help or insight would be very much appreciated.
I'm not an accountant. I would start with your current average (effective) tax rate, federal plus state.
Thank you. I was wondering if anyone knows if you would use a standard rate throughout. For example 20% for my pretax accounts and 20% for his pretax accounts, or do you base it on each person's tax bracket? Thank you
@janey12 20% effective rate is not that easy to get to unless you are in a really high tax bracket (again: note the difference between effective and marginal).
I once did some calculations and found that in retirement, you need a 6-figure budget to even make it into the 10% federal effective tax rate:
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Yes I was going to use an average between my accounts and my soon to be ex's accounts. The thing is that I think he would want to use a standard percentage on both. He will not go for using a higher one for me and a lower one for him. Does anyone know what would be a good choice. I thought 20%, because it is somewhat an average between both of us. Any thoughts would be appreciated. Thank you.