If you have multiple retirement savings accounts, PensionPlus can help you structure your monthly withdrawals to minimize your tax costs.
Here are some general guidelines to consider when thinking about taxes in retirement:
- Contributions to retirement accounts, such as a 401(k) or traditional IRA, may be tax-deductible, which can help to reduce your taxable income.
- Income from a traditional IRA or 401(k) is typically taxable, so you will need to factor in the tax implications of withdrawals from these accounts when planning for retirement.
- If you have a Roth IRA or Roth 401(k), contributions to these accounts are not tax-deductible, but qualified withdrawals in retirement are tax-free. This can be a good option if you expect to be in a higher tax bracket in retirement.
- Social Security benefits may be subject to taxes, depending on your income level. If your income is above a certain threshold, a portion of your Social Security benefits may be subject to federal income taxes.
It's important to consider these tax implications when planning for retirement and to work with a financial advisor or tax professional to ensure that you are making the best decisions for your situation.