Matt Stevenson discusses the importance of focusing on taxation in 3 types of retirement income.
Consideration is given to the future of tax rates, why marginal tax rates might be significantly higher in the near future, and why we should focus on making our retirement savings as tax-efficient as
possible in the face of these headwinds.
Retirement income, including income from pensions, Social Security, and retirement savings accounts, is generally taxed in the same way as other types of income. The specific tax treatment of your retirement income will depend on the types of income you receive and your tax filing status.
Here are a few general points to consider:
1. Social Security benefits: Some or all of your Social Security benefits may be subject to taxation, depending on your total income and filing status. If your provisional income (which includes your adjusted gross income plus any tax-free interest income and 50% of your Social Security benefits) is above a certain threshold, a portion of your benefits may be taxed.
2. Pension income: Pension income is generally taxable as ordinary income. If you received a lump-sum payment from a pension plan, you may be able to spread the income over a period of years and pay tax on it accordingly.
3. Retirement savings accounts: Contributions to traditional individual retirement accounts (IRAs) and 401(k) plans are made with pre-tax dollars, so the income is generally taxed when it is withdrawn in retirement. Withdrawals from a Roth IRA, on the other hand, are tax- free if you’ve had the account for at least five years and you are over age 59 1/2.
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Topics we will be covering are Retirement and Financial Planning, Investment Selection, Retirement Income Planning, Taxes and Taxation during Retirement, Healthcare, Long Term Care, Legacy and Estate Planning, in addition to important Market and Economic changes impacting Retirement.
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