Taxes After Retirement
You’ve worked hard all your life and are ready to relax. You may not have a regular paycheck coming in anymore, but you still may have a tax burden on income you receive while in retirement.
Most people count on being in a lower tax bracket once they retire, but don’t forget that you will probably have fewer write-offs too. Many retirees no longer have a mortgage and that means no mortgage interest deductions. Because less money may be available for items such as charitable contributions, many retirees stop itemizing and simply file a 1040-A. That will count as income. Your 401(k) was a great way to save on taxes while you were working, but remember you’ll owe taxes when you withdraw those funds. All of these things could actually put you in a higher tax bracket.
Your Social Security benefits may also be taxable depending on your income. Since Roth IRAs were not tax deferred when you put money into them, they won’t be taxable when you withdraw those funds (after age 59 ½).
With some planning, you can control your amount of taxes after retirement. Pay attention to how you withdraw from your retirement funds. Remember, you will want to keep yourself in the lowest tax bracket possible when you’re retired.