This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
The main areas featured here include:
📌 Social Security: Your income threshold determines what taxes you owe on Social Security benefits. For example, single filers earning above $34,000 or joint filers earning above $44,000 in 2022 face 85 percent of benefits counting as taxable income.
📌 Tax-deferred retirement income: Savings in traditional retirement accounts including your IRA, 401(k), 403(b), 457, etc., were excluded from taxable income for years, but once you make withdrawals, the IRS expects their dues. As such, this money is taxed at the current tax bracket based on the year you make your withdrawal.
📌 Annuities: Income from annuities is taxed based on how your account is titled. For example, this will change if you own an annuity in an IRA, versus if you own a Non-Qualified annuity. When profits are depleted, you can withdraw your cost basis tax-free.
📌 Medicare: Those with a high retirement income will pay surcharges for Medicare premiums on Part B and Part D coverage, depending on their IRMAA (Income Related Monthly Adjustment Amount).
📌 State taxes: This will solely depend on where you live and the amount of retirement income you have.
📌 Roth IRA income: To help create tax diversification, Roth IRA contributions utilize after-tax dollars, which means withdrawals are tax-free in retirement.
Protect your savings with a strategy: Your taxes in retirement will most likely be more complex than they were during your working years. As a result, significant planning opportunities should be leveraged.