Taxes & Retirement

Taxes and Your Retirement: What You Need to Know

Taxes are unavoidable at any age but can be particularly challenging in retirement. When you are living on a fixed income and enjoying the best years of your life, you don’t want to pay more than the minimum amount required. 

Whether you are preparing for retirement, newly retired, or well into your retirement years, it’s essential that you understand your burden for both state and federal taxes. An experienced accountant can be a valuable resource to help you understand the tax rules so you can make informed decisions that will keep your tax bill low.

Tax Tips for Retirees

Here are a few tips that might help with your tax payments:

• Annual Retirement Withdrawals: If you have a traditional IRA, 401(k), or other employer-sponsored plans for retirement, then you must start taking annual withdrawals by the age of 70 1/2. Failing to take the required minimum distributions (RMDs) could result in big tax penalties – as much as 50% of the amount you were supposed to withdraw.
• Taxes on Social Security Benefits: Receiving retirement money from Social Security means that you might need to pay taxes once your payments reach a certain threshold.
• Paying on Retirement Income: Since the US has a pay-as-you-go tax system, it means that you need to pay taxes on retirement income right away instead of waiting to file your taxes at the end of the year. Some people choose to have money withheld from these distributions automatically. If you don’t have an automatic withholding, then you may need to pay quarterly estimated taxes.
• Claiming Deductions: Look for ways that you can reduce your tax burden by claiming deductions. For example, medical expenses that aren’t covered by Medicare might qualify as tax deductions if you choose to itemize your filing.
  

In any case, it’s always helpful to have a team of experts to assist with your financial strategy in retirement. If you are preparing to move and considering the tax implications of buying or selling a home, then our team at Greenwald & Gerke is here to answer your questions.  We specialize in real estate services for retirees and would love to help you find the best strategy for finding the right home for this time in life. Call to learn about these quality services: (844) 782-9674.