How Retirement Income Is Taxed (And Why It’s Not All the Same)

Описание: Many families and individuals assume their tax bill will be lower in retirement, but that’s not always the case. That’s because every income source—from Social Security to Roth IRAs—is taxed differently.

Traditional 401(k)s, 403(b)s, and IRAs are fully taxed as ordinary income when you withdraw, and those withdrawals become mandatory at age 73 due to Required Minimum Distributions (RMDs). Pensions fall into the same category—fully taxable as income in the year received.

Social Security is more complex. Depending on your other taxable income, up to 85% of your Social Security benefits may be taxed, using something called the provisional income formula. This surprises many retirees.

Taxable brokerage accounts, often referred to as non-qualified or individual accounts, are subject to capital gains taxes. If you hold investments for more than a year, you could qualify for long-term capital gains rates—which are lower than ordinary income tax rates. Short-term gains and interest income, however, are taxed like regular income.

Roth IRAs and Roth 401(k)s offer powerful tax advantages. Qualified withdrawals are tax-free, and Roth IRAs are not subject to RMDs. These accounts can be key tools for tax diversification and legacy planning.

Rental income and annuity payouts also carry tax implications. Real estate income is taxable but can be offset with deductions. Annuities vary: those funded with pre-tax dollars are fully taxable, while after-tax annuities are taxed only on earnings.

Inheritances can come with a hidden tax burden. The SECURE Act requires inherited IRAs to be emptied within 10 years, which can result in a large tax hit for your heirs—unless you’ve taken steps to reduce it.

Understanding how each income stream is taxed empowers you to make smarter retirement decisions—and avoid costly surprises.
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Watch the full episode here:    • Taxes Are Different In Retirement — Here’s...  
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Loren Merkle, CERTIFIED FINANCIAL PLANNER™, RETIREMENT INCOME CERTIFIED PROFESSIONAL®, CERTIFIED FINANCIAL FIDUCIARY®
https://merkleretirementplanning.com/...

Clint Huntrods, CERTIFIED FINANCIAL FIDUCIARY®, PhD, Retirement Planner
https://merkleretirementplanning.com/...

Molly Nelson, Host of Retiring Today
https://merkleretirementplanning.com/...
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