Tax Planning for Retirement Income

Tax Planning for Retirement Income

Sources of Retirement Income and How They're Taxed

Social Security

• 0–85% may be taxable depending on combined income

Traditional IRA / 401(k) Withdrawals

• Fully taxable as ordinary income
• Subject to Required Minimum Distributions starting at age 73

Roth IRA Withdrawals

• Tax-free if account is at least 5 years old and you're over 59½

Pension Income

• Typically fully taxable unless after-tax contributions were made

Dividends and Capital Gains

• Qualified dividends and long-term gains taxed at preferential rates

The Withdrawal Sequencing Strategy

1. Withdraw from taxable accounts first to let tax-deferred accounts grow
2. Then draw from tax-deferred accounts (traditional IRA/401k)
3. Last, withdraw from Roth accounts

Roth Conversion Ladder

Convert traditional IRA funds to Roth during lower-income years in early retirement to reduce future RMDs.

Managing Your Tax Bracket

Carefully manage withdrawals each year to stay within your target tax bracket.

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Approaching retirement? A personalized income strategy can save you tens of thousands in taxes.