When you contribute money to a tax deferred account, it is a bit like going into a business partnership with the IRS. The problem is, every year the IRS gets to vote on what percentage of your profits they get to keep. So, you could have$1,000,000 in your IRA today, but unless you can accurately predict what tax rates are going to be in the year you take a distribution, you really have no idea how much money you have. And it is pretty hard to plan for retirement if you don’t know how much money you have.

Most people transitioning into retirement hold the belief that they will be in a lower marginal tax rate. Ever hear someone say that? Well, the truth is if they are in a lower tax bracket, they will have a lower standard of living as well. The harsh reality is called Provisional Income which is the calculation of the taxation of your Social Security benefits.