Learn what you need to know as you approach your retirement years and the taxation of your income that can prevent you from making the wrong moves…
Did you know that there are a number of concerns that you should have as you approach retirement age?
Hopefully you have managed your credit and finances effectively prior to your retirement years and you are in position now (if you are currently retired) to take advantage in ways that will better serve your retirement years.
Whether you are or are not retired be sure to focus in on what can help you achieve more at this time and throughout your lifetime. By doing so you will put yourself far ahead of those who enter retirement without doing the preparation that is necessary that could guide them toward a more enjoyable retirement journey.
In this discussion TheWealthIncreaser.com will show you ways that you can make your retirement years more enjoyable and put you on path to making the retirement that you desire have less roadblocks for you and your loved ones.
First and foremost you must realize that you want to address your retirement related financial activity in a manner where you will have no surprises as it relates to your taxes as many who retire often have no clue how their tax position will impact their retirement years.
You must be aware of how the taxation of your IRA’s and 401k’s etcetera, social security benefits, w-2 income (if you work part-time during your retirement years), investment income, self-employed income or other pass through income and earned pension income–will all affect your tax position.
If you don’t withhold enough income or pay estimated taxes at the right amount with your IRA’s and 401k’s etcetera, social security benefits, w-2 income (if you work part-time during your retirement years), investment income, self-employed income or other pass through income and earned pension income when you receive those income streams you could be in for an unpleasant tax surprise if you have not planned ahead and gotten at least a cursory overview of how taxes will affect your income streams during your retirement years.
- IRA’s, 401k’s and other retirement plans
IRA’s, 401k’s and other retirement plans may require that you begin taking distributions at age 70 1/2 even if you have no need for the funds. You must plan for the tax consequences of these withdrawals at the federal and state level (if applicable) and know where you will fall based on your unique tax position.
- Social Security benefits
Your social security benefits may or may not be taxable depending on your unique tax position. However, there is the potential that your taxes could be 85% on your social security income. You can elect to receive your social security at various times after you turn age 62 and you must determine if taking early payments or waiting is the best move for you and your family from a tax point of view based on your overall finances and future plans.
- W-2 income
If you work part-time during your retirement years you may find that it will affect the taxation of your IRA’s and other retirement accounts, social security income, investment income and your pension income.
- Investment Income
Your investment income will also be taxed during your retirement years and you must know the rate that you will pay during your (and your spouse if married) retirement years based on your annual income and filing status. There are various thresholds and depending where you fall in those thresholds you could pay 0% up to 20% depending on the type of investment, your income and your filing status.
- Self-employed income and/or other pass through income
If you decide to work for yourself or you receive pass through income from a partnership or S corporation there will be tax consequences and they will vary based on your income from self-employment, other pass through income and all of your other sources of income and your filing status.
- Earned Pension Income
If you have worked for an employer and they had a pension plan you would receive a 1099R and you would be taxed on that pension income at the Federal level in almost all cases. The question then becomes did you have enough withholding or did you pay enough in estimated taxes to offset the taxes that you would owe.
At the state level you would also be taxed but the rate varies from state to state and many states offer you the opportunity to exclude certain retirement and other income from your taxes if you meet the states requirement. In a few states there are no state income taxes at all, and if you live in one of those states that is even better.
It is imperative that you look at the tax consequences of the various income that you will receive during your retirement years. It might be helpful to get professional projections of the taxes that you may owe under various situations from your CPA or other financial professional(s) so that you can know what to expect during your retirement years.
Did you seriously consider the tax ramifications of receiving income from IRA’s and 401k’s etcetera, social security benefits, w-2 income (if you work part-time during your retirement years), investment income, self-employed income or other pass through income and earned pension income?
Did you analyze and determine that you will have the income that you need to live at the level that you desire after your retirement years after the payment of taxes from your various sources of income?
These—and more are the types of questions that you must answer prior to retirement so that you don’t enter your retirement years with an unrealistic expectation of how you can enjoy life.
You must fervently pursue your retirement goals, effectively utilize this page and site, make yourself available to learn more about retirement and taxes from other sources and make the right financial moves in a proactive manner throughout your life.
All the best as you work toward your retirement success…