The second tax rate worth knowing is your marginal tax rate. This number is generally significantly higher than your effective tax rate. The easiest way to calculate it is using tax software upon finishing your taxes each year. Simply add $1,000 of hypothetical income and see how much your tax bill rises. This year, my tax bill increased by $418 for that hypothetical $1,000, so my marginal tax rate is 41.8 percent. The software accounts for federal income tax, state income tax, phase-outs, and even payroll taxes if you are self-employed. Knowing your marginal tax rate is useful when making decisions about money, such as whether to invest in taxable bonds or tax-free (but lower-yielding) municipal bonds in a taxable account. It may also affect how many extra shifts you wish to work, knowing that 30 to 50 percent of every additional dollar you earn is going to taxes. Your marginal tax rate can be lowered using the same techniques used to lower your effective tax rate.

Your Annualized Investment Return

Many investors have no idea what their investment returns are. That makes it very difficult to know if you are on track to reach your goals. It is best to calculate your returns on an after-expense, after-tax basis. The most accurate way to calculate your investment return is using an internal rate of return (IRR) function in a spreadsheet or a financial calculator. The only data needed to do this are the amounts and dates of contributions and withdrawals (including any dividends not reinvested) to the account. Since the contributions will not be regular, you will need to use a function called XIRR, or the internal rate of return with nonperiodic cash flows. This function provides an annualized rate of return as opposed to an average rate of return. It is important to know the difference since the only return you can spend is an annualized one. By way of comparison, the average annual return of the S&P 500, with dividends reinvested, from the years 1927 through 2014 is 12.1 percent. However, the annualized return is just 10.1 percent. This effect is due to the volatility of investment returns; in short, you need a 100 percent gain to make up for a 50 percent loss. The more volatile your investment returns, the greater the difference between your average returns and your annualized returns. A tutorial showing how to use the XIRR function to calculate your return can be found here.