You work hard and save as much as you can to be able to retire someday. And once you are retired, it’s time to kick back and enjoy your life and all the activities that you want to do. But are you prepared for your retirement to be invaded by Uncle Sam? Are you prepared for a 10%, 15%, 25% or more in reductions from your retirement plan?
This could be the effect that taxes have on your retirement, as most forms of retirement income — including Social Security benefits as well as withdrawals from your 401(k) and traditional IRAs — are taxed by Uncle Sam. And unless you live in one of seven states with no income taxes at all, you can expect your home state to ding you as well. How can this be?
Well, one of the biggest myths about retirement is the one that most people feel they will be in a lower tax bracket in retirement, or will not owe any taxes at all. Unfortunately, in many cases this is simply not true and believing in this myth can get a lot of people into trouble. Most retirement assets and incomes are subject to taxes in retirement. Because of the way the tax code is set up this can have a ripple effect and cause you to possibly be in a higher tax bracket in retirement. Thus, in order for your retirement plan to be all that it can be, you have to understand how taxes work and know the proper ways for reducing or eliminating them.
To learn more and the details of how all the different sources of retirement assets and incomes are subject to taxation, as well as the possible ways to set up your retirement plan properly to reduce and/or eliminate taxes in retirement, visit The Prepare Institute website and find an upcoming educational retirement course in your area.
Content is for educational and informational purposes only. It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. You should contact your retirement and tax professional before utilizing any of the information in this article.