- What Is the Tax Rate on 401(k) Withdrawals After Age 65?
Reaching age 65 doesn’t automatically change how the IRS taxes your 401(k) withdrawals. Instead, it taxes distributions from a traditional 401(k) as ordinary income, just like wages or Social Security benefits. Your tax rate depends on your total taxable income and filing status in the year you make the withdrawal, not your age. That means… read more…
- How to Avoid Taxes on a 457(b) Withdrawal: Strategies and Examples
Planning how and when to withdraw money from your retirement accounts can have a big impact on how much of your savings you actually get to keep. This is especially true with 457(b) plans, which are common for public sector employees. While these accounts offer unique flexibility when compared with other retirement plans, they also… read more…
- I’m 63 With $1 Million in an IRA. Should I Convert $100,000 a Year to a Roth to Avoid RMDs?
If you’re 63 years old with $1 million in a traditional IRA, you may wonder whether converting $100,000 per year to a Roth IRA makes sense. Doing so may help you avoid required minimum distributions (RMDs) later on. It may also reduce your future tax burden and give you more control over your retirement withdrawals. … read more…
- Provisional Income: What Is It and How Is It Taxed?
Your Social Security benefits may be taxable depending on your provisional income. This is calculated by adding your adjusted gross income (AGI), any tax-exempt interest and half of your Social Security benefits. The IRS compares this total to set income limits to decide if 0%, up to 50%, or up to 85% of your benefits… read more…
- Which States Tax Social Security Benefits?
Taxation of Social Security benefits at the state level can significantly affect your overall retirement budget. How large the effect is, or whether there is an effect at all, depends on which state you retire to. While most states do not tax Social Security income, nine states impose taxes on all or part of these… read more…
- Roth vs. Pre-Tax Contributions: What to Consider
Choosing between Roth and pre-tax contributions for retirement savings depends on how each impacts your taxes now and in retirement. Roth contributions are made with after-tax dollars, so both contributions and earnings can be withdrawn tax-free in retirement if done correctly. Pre-tax contributions, on the other hand, reduce taxable income now but are taxed upon… read more…
- Early Retirement Tax Strategies to Know
Early retirement tax strategies are crucial for ensuring that your hard-earned savings last throughout your retirement years. By strategically managing your investments and withdrawals, you can minimize tax liabilities and maximize your retirement income. This involves understanding the nuances of tax-advantaged accounts, such as IRAs and 401(k)s and how early withdrawals might trigger penalties. Additionally,… read more…
- Does Virginia Tax Social Security?
Virginia does not tax Social Security benefits, which means that retirees in the state can get their Social Security income without state tax deductions. However, other forms of retirement income, such as pensions or distributions from retirement accounts, may still be subject to Virginia state taxes. If you’re worried about taxes in retirement, a financial… read more…
- Can You Retire and Still Work a Job?
Can you retire and still work? Yes. Should you consider working in retirement? The answer depends largely on your financial needs, health and how much emotional or mental benefit you stand to gain by continuing to work once you’re retired. On the financial side, two of the biggest concerns are the potential tax implications and… read more…
- I’m Going to Get $2,500 per Month From Social Security. How Can I Reduce My Taxes?
Taxes can be a big concern in retirement because no matter how well you’ve saved and invested during your working years your challenge is to keep as much of it as possible. That means structuring your finances, withdrawals and income in a way that minimizes how much you fork over to the IRS. Take Social… read more…
- 5 Tax Strategies for Your Retirement Income
Retirement planning can be complicated, but ignoring the tax consequences of your retirement income can take a bite out of your nest egg. A few strategic steps can help you minimize your tax liability. When planning for retirement, consider these five tax strategies to help you maximize your retirement income. For a more hands-on approach,… read more…
- Can I Use My RMDs to Transfer Money Into My Roth IRA?
Once you turn 73 (or 75 if you were born in 1960 or later), you’ll need to take required minimum distributions from any tax-deferred retirement accounts you own. You might be asking this question: Can you use an RMD to transfer money to a Roth IRA? No, IRS rules do not allow that. You could,… read more…
- Our Combined Income Will Top $400k This Year. Can We Use a Backdoor Roth to Avoid Future Taxes?
A backdoor Roth conversion can save you significantly in future taxes, but at the cost of paying those taxes now. This isn’t always a good deal in the long run. If you’re considering a backdoor Roth IRA or other strategies to save on taxes, consider talking it over with a financial advisor. For example, perhaps… read more…
- I’m Going to Get $3,000 Per Month From Social Security. How Can I Reduce My Taxes?
When determining your income taxes in retirement and on your Social Security benefits, the IRS uses your “combined income” and filing status as the two main markers. At $36,000 a year from Social Security, none of your benefits would be taxable, since only half of your benefits are calculated into combined income. However most, if… read more…
- I’m Selling My House and Netting $800k. Can I Avoid Taxes While Downsizing for Retirement?
When you sell a primary residence, the IRS allows you to exclude from your capital gains taxes the first $250,000 of profits if you file single or $500,000 of profits if you file jointly. You must include any surplus of those amounts in your taxable capital gains for the year, though. So, what if you… read more…
- This Is My First Year Taking Social Security. How Do I Reduce My Taxes on It?
As your first year of retirement progresses, it’s important to evaluate whether the financial plan you laid out to ensure your sustainable well-being is going according to plan. An appropriate plan should include tax calculations to understand how much of your income will truly be at your disposal for needs and wants. Some people may… read more…
- We’re Selling Our House and Netting $550k to Downsize for Retirement. How Can We Avoid Capital Gains Taxes?
Selling your home to downsize can make your retirement more financially stable, but if you have a profit on the sale you might owe capital gains taxes. Fortunately, in many cases those selling their primary residence who are single can exclude $250,000 from capital gains taxes, while married couples filing jointly can exclude $500,000. Employing… read more…
- We Will Make Over $300,000 Combined This Year. Can We Use a Backdoor Roth to Reduce Taxes?
High-income households can use what’s called a “backdoor Roth” to utilize a Roth IRA despite the program’s standard income restrictions. This can be an effective way to build a tax-free stream of income for your retirement, and it is a completely legal strategy. Whether this method will reduce your taxes depends heavily on your tax… read more…
- 5 Common Retirement Tax Traps and How to Avoid Them
Tax management can be complex, particularly for those who are not well-versed in tax laws and regulations. A variety of tax traps may await you in retirement, which could significantly eat into your income and savings. Common traps include taxes on Social Security benefits, Medicare surcharges, required minimum distributions (RMDs), real estate sales and estimated… read more…
- I Will Make $200k This Year. How Can I Use a Backdoor Roth to Avoid Taxes in Retirement?
If you’re a relatively high earner, you might be locked out of making Roth IRA contributions due to the account’s associated income caps. In that case, you can instead consider a conversion, otherwise known as a “backdoor Roth.” The advantage to doing this is that you will avoid all income taxes on withdrawals from the… read more…
- Where You Keep Your Investments Can Help You Save Big on Taxes in Retirement
Where you keep your money matters. When it comes to retirement taxes, there are two main issues to consider: account type and asset class. Account type is where you keep your investments, such as an IRA, a 401(k) or a taxable account. Asset class refers to the type of investments you own, like stocks and… read more…
- How Retirement Account Withdrawals Affect Your Tax Bracket
How you withdraw money from retirement accounts can affect the amount of tax you owe. Withdrawals can count as income, capital gains, or be tax-free, depending on the account. The more you withdraw in taxable income, the higher your tax bracket may be. Planning these withdrawals can help manage your tax bill in retirement. If… read more…
- Do You Pay Medicare Tax on Retirement Income?
If you generate retirement income from an investment portfolio, you will not pay FICA taxes such as Social Security and Medicare tax. However, you might owe a supplemental Medicare tax if you are a high earner. If you generate retirement income from working a job, running a business or otherwise earning income, you will pay the… read more…
- Federal Tax Rates for Different Types of Retirement Income
Federal taxes on retirement income vary depending on the type of income you receive and your overall tax situation. Sources such as Social Security benefits, traditional IRA or 401(k) withdrawals, pensions and investment earnings may each be taxed differently. Some retirement income is fully taxable, while other sources may be partially taxed or tax-free. Understanding… read more…
- Earn Over $145k? You May Have to Pay Taxes on Your Catch-Up Contributions
Catch-up contributions are about to change. Starting in 2024, some workers who make catch-up contributions to employer-sponsored retirement plans, like a 401(k), will have to put this money in a Roth account. This means that they cannot deduct these contributions from… read more…