Taxes After Retirement
You’ve worked hard, and now it’s time to enjoy the rest of what life offers. With some planning, you can control your tax liability after you retire. Even though you may not have a regular paycheck, you still may have a tax burden.
Most people count on being in a lower tax bracket after they retire, but they forget that they likely will 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 Form 1040-A. Your 401(k) was a great way to save on taxes while you were working, but you’ll owe taxes when you withdraw those funds. All of these things could put you in a higher tax bracket.
Your Social Security benefits may also be taxable, depending on your income. Because Roth IRAs were not tax deferred when you put money into them, they won’t be taxable when you withdraw those funds (after age 59½).
Pay attention to how you withdraw from your retirement funds. Remember, you will want to keep yourself in the lowest tax bracket possible.
Updated for 2015 Tax Year