First Person: How Are We Supposed to Retire?

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COMMENTARY | Lately, I feel as if costs are getting out of control. I'm sure that I fall into the majority on that viewpoint; however, as responsible savers and spenders, our family prides itself upon being able to mitigate expenses and maximize savings when and where necessary. However, two budget items with which we're having trouble in this area are health costs and taxes. We're almost feeling trapped by these costs, as we have little power over how they affect us, the rate at which they are increasing, and what we can do to control them.

Income and Property Taxes

Being self-employed, I'm on the hook for both sides of employment taxes. Add in the fact that state of Illinois recently bumped up their state income tax rate from 3 to 5 percent, the property taxes that we've managed to get down from about $5,000 by downsizing from a single-family home to a smaller condo are still about $3,000 annually, and federal income taxes, and we pay about 20 percent of our total income in these taxes each year.

Miscellaneous Taxes

But our tax misery doesn't end with income and property taxes. We have to bear in mind all those other little taxes that are tacked on to all our regular purchases. Taxes related to filling up the car with gas, utilities consumption, buying food or clothing, excise taxes, tolls, and all the city, county, state, and federal taxes that come with consumer purchases can add up over the course of the year.

While we can minimize these taxes to a point by reducing purchases, buying resale, and generally spending less, there's only so much we can do when it comes taxes on things like food, toiletries, certain clothing needs, utilities, and taxes on other necessities. While not a major expense, these costs add up nonetheless, and I would say they probably add about another 1 percent of our total income to the tax pot.

Health Insurance Premiums

Our health insurance premiums probably top the list of regular budget items that are really taking a toll on our finances. Our premiums just took another double digit percentage increase this year, pushing our annual costs for our insurance coverage to just over 15 percent of our annual income. But this doesn't mean our health-related costs end there.

Other Medical Costs

With my wife being a type 1 diabetic, and having two small kids, our annual health-related costs continue in this area as well. With all the medicine, supplies, doctor appointments, and preventative maintenance on our family of four, these costs add up to about another 4 percent of our annual income.

So when everything is said and done, between these two costs -- taxes and health care costs -- we end up paying almost 40 percent of our total regular (pre-tax) income toward these two costs. Unfortunately, there is little we can do to remedy the situation. My wife isn't going to miraculously recover from a condition that she's had since age 12, and unless we want to go the route of Al Capone and start evading the tax man, we're committed to paying our taxes as well. Such a heavy burden -- that seems to become increasingly harder to carry each year -- makes it difficult to find the extra money to put toward things like savings and retirement.

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