The brief’s key findings are:
- Households nearing retirement may forget that not all of their retirement resources belong to them, as they will need to pay some portion in taxes.
- The question is just how large the tax burden is for a typical retired household and for those at different income levels.
- Using the Health and Retirement Study, this study estimates the present discounted value of lifetime taxes at retirement to the present value of retirement income.
- While the results show that taxes for most households are negligible, the burden rises to 11 percent for the top quintile, 16 percent for the top 5 percent, and 23 percent for the top 1 percent.
- Because the HRS excludes many of the very wealthy, the reported average 401(k)/IRA holdings for the top 5 percent and 1 percent look quite similar to what many academics hold in their TIAA accounts.