Mark Miller, in his New York Times article, discusses the key ways that income is taxed in retirement. his article, “What Retirement Means for Your Taxes”, begins as follows:
If you dread tax day every year, here’s a bit of good news: Your tax burden probably will lighten when you retire.
You’ll still pay taxes on income you receive from sources that haven’t been taxed yet, such as 401(k) and individual retirement accounts or a defined benefit pension. Your Social Security benefits also may be taxed, depending on your income. And higher-income seniors pay surcharges on Medicare premiums that, while not technically taxes, certainly feel like it to retirees.
But for most households, tax rates fall in retirement, according to research by the Investment Company Institute and the Internal Revenue Service. “Some of the decline is due to the fact that you’re not making payroll tax contributions, but income taxes tend to fall both because your total income is typically lower and because only a portion of Social Security is taxable,” said Peter Brady, senior economic adviser at the institute, a trade group representing the asset management industry.
To see the full article, click: “What Retirement Means for Your Taxes”
Posted by Anthony Tran, Associate Editor, Wealth Strategies Journal