(06) Taxes in Retirement

Taxes in Retirement

Taxes in Retirement

Taxes in Retirement

Designed for households in or near retirement
Most relevant for individuals age 59½ and older
Taxes in retirement are often more complex than during working years
Withdrawal sequencing can significantly affect lifetime taxes
Managing taxable income becomes a key retirement planning strategy

Tax Deferred

Taxes in Retirement

Taxes in Retirement

Traditional IRA
401(k) and other employer plans
Withdrawals are taxed as ordinary income
RMDs at 73 or 75
Fully taxable unless received by a qualified charity
Qualified Charitable Distributions (QCDs)

Tax Free

Taxes in Retirement

Tax Free

Roth IRAs
Roth 401(k) and other employer plans
Withdrawals are tax free
No RMDs

Taxable

Retirement Account Beneficiaries

Tax Free

Interest and non-qualified dividends taxed as ordinary income
Qualified dividends and long-term gains taxed at lower rates
Mutual funds may distribute taxable gains unexpectedly
Step-up in basis at death for heirs

Retirement Account Beneficiaries

Retirement Account Beneficiaries

Retirement Account Beneficiaries

Name your spouse as primary beneficiary (if married)
Name individuals as contingent beneficiaries whenever possible
Avoid naming your estate, which can trigger less favorable tax rules
Accounts with properly named beneficiaries pass directly to the beneficiary and generally avoid probate

Taxable Income Considerations

Retirement Account Beneficiaries

Retirement Account Beneficiaries

Social Security taxation up to 85%
Medicare IRMAA
Capital gains rates
Net Investment Income Tax
Senior Deduction
SALT Deduction
Charitable Deductions