In the course of planning for retirement as that milestone nears, you may end up doing your fair share of number-crunching. And those calculations should include a couple of things:

  • Your anticipated retirement income
  • Your anticipated retirement expenses

To arrive at the first, assess your savings and see how much money you've accumulated. Then, figure out what percentage of your savings you'll withdraw on an annual basis. If you have $1.5 million saved and expect to tap your nest egg to the tune of 4% per year, that'll translate into $60,000.

A person at a laptop using a calculator.

Image source: Getty Images.

You'll also want to account for other income sources, like Social Security. And you can get an estimate of your monthly benefit by accessing your most recent earnings statement on the Social Security Administration's website.

Meanwhile, to figure out what your retirement expenses might look like, you'll need to think about factors such as where you'll live, whether you'll own a home, and what you'll do with your time. But there's a less obvious expense you may not think to factor into your calculations. And that could leave you in a serious lurch.

Don't forget about taxes

Many forms of retirement income are subject to taxes. If you don't account for those, it might throw your finances for a major loop.

First, withdrawals taken from a traditional IRA or 401(k) plan are taxable. If you have a Roth savings plan, your withdrawals will be yours to keep free and clear of taxes.

Next, Social Security benefits are often taxable in retirement at the federal level, and sometimes at the state level, too. If you have very little income outside of your monthly benefits, you might avoid taxes on Social Security. Otherwise, assume some or most of your benefits will be taxed.

You may also have investments in a non-tax-advantaged account that pay you on a regular basis, such as dividend-paying stocks or interest-paying bonds. That income, too, is taxable.

Plan accordingly

It's important to know which income sources of yours are taxable ahead of retirement so you know to anticipate those IRS bills. That said, figuring out your retirement tax bracket can be tricky. That's because that bracket can change in accordance with tax code changes.

Also, it may be that your income isn't 100% consistent during retirement. You may have a year where you withdraw less money from your IRA or 401(k) due to poor market conditions. So that, too, could influence the tax bracket you land in.

As such, you may not be able to calculate your specific yearly tax bill ahead of retirement. But in that case, you can do your best to estimate your taxes (perhaps with the help of a professional) and make sure you're factoring those IRS payments into your budget.

Retirement can be a financially stressful period of life, because it's hard to adjust to having to live off of savings. Forgetting about taxes could make that shift even more stressful, so take some time to read up on the taxes retirees commonly face so you can plan accordingly.