When we are working, taxes are a part of daily life and influence the considerations that we take in our spending habits. Once we start thinking about retiring, we often forget to add in taxes as a component to our thought process. It is important to understand your tax situation in retirement prior to retiring so that you will be ready when the time comes to pay on the taxes due. 1. Social Security When we think about retirement, Social Security tends to be the first thing that comes to most people’s minds. An individual’s Social Security is funded by reducing a portion of their paychecks as taxation payable towards the Federal Insurance Contributions Act, better known as FICA taxes, as well as their employer paying in matching taxes from their own funds. For the self-employed, both sides of FICA are paid through self-employment taxes based upon the Self-Employment Contributions Act of 1954 (SECA) by the self-employed individual. Social Security was originally created through the Social Security Act of 1935, to ensure basic rights to each person as they aged, became unemployed, and for under working age children. While it has gone through several changes since President Roosevelt first signed it into law, the idea behind Social Security remains the same.