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Shining A Light On Your Taxes In Retirement

What You Should Know About Your Taxes in Retirement?

You’ve spent much time and effort accumulating money for retirement. It is critical to understand how taxes might affect what portion of that money you actually keep.  Here are six questions commonly asked about taxes in retirement:

What can be used for tax-free income in retirement?  

Tax-Free income can be from a Roth Account, Municipal Bonds, and Cash Value from Life Insurance.

Do I pay tax on my Social Security benefits? 

It depends on something called your ”provisional” income. This is an important number and there are some important strategies you can learn to lower your provisional income and make sure your social security is received without being taxed.

Do I pay tax if I sell my house for a profit?  

If you are single the first $250,000 of any gain is tax-free and if you are married it is $500,000. You must have been in the house for two or more years and it has to be your primary residence.

Do I pay tax on Medicare or Medigap benefits?  

No, those benefits are tax-free.

Is there a time limit to rolling over an IRA to a Roth? 

 No, you can do a rollover at any time

Can I always contribute to an HSA?  

No, once you enroll in Medicare you can not contribute to an HSA.  You can use any money still in the account tax-free for medical purposes.

Please see the below tax information for current tax rates and for income taxes, capital gains taxes, and how certain financial products you own will be taxed.

What is taxed at a capital gains rate if held for more than one year? 

Qualifying dividends (those dividends received from companies you have owned for more than 60 days for common stock and 90 days for preferred stock), stocks, investment properties held for one year or longer, structures, or any asset other than a personal residence.

How are the following investments and financial products taxed?

IRA’s:  Ordinary Income-tax (unless it’s a Roth then tax-free)

Annuities: Income or growth is ordinary income

Mutual Fund:  Funds held less than a year are treated as short term capital gains and taxed as ordinary income, growth on underlying investments held longer than a year are taxed as capital gains

REITs: Ordinary Income

Corporate Bonds: Interest taxed as Ordinary Income Growth is capital gain if held more than a year

Municipal Bonds:  Federally tax-free, pay state income tax 

US Savings Bonds:  State Income tax-free, pay federal tax

Alimony: If divorced before 12/31/2018 alimony is taxable and tax-deductible to the payor

Disability Benefits: – If the premium paid by individual benefit is tax-free. If paid by business benefit is taxable

Group Life: – Any premium paid by a business over $50,000 of DB is taxable

Gifts:  Up to $15,000 tax-free, above gift tax applies

Damages – Only Bodily injury payments are tax-free all others including punitive damages are taxable

Incentive Stock Options: 

  • When options are granted there is no tax.
  • When options are exercised there is generally no tax, however, certain instances will trigger an alternative minimum tax adjustment.
  • When options are actually sold a long-term or short-term capital gain will be assessed. 
  • Must hold the option for two years from the grant date and one year after the exercise date to receive favorable tax treatment.



Learn More About IFW’s Retirement Planning Education Services

It’s never been more important than now to mitigate market risk, devise a tax reduction game plan, and learn strategies for the most retirement income.  If you’re interested in paying less or possibly no tax, increasing retirement income, and never running out of money in retirement, make sure to attend the next live IFW Retirement Roadmap Webinar.  It’s FREE & happens every Wednesday at 7 PM. EST.   Get all your retirement questions answered during the live Q & A.  Every attendee also has the opportunity to receive their own FREE customized retirement roadmap.  REGISTER FREE NOW!


The IFW provides valuable financial education, resources, and services that help people live their best life. 

Please remember, be mindful of the messenger that positions certain products or services as “always” bad or “always” perfect.  The fact of the matter is there are no “bad products” or “perfect products”.   The right product is the one that aligns with your goals and objectives.

The Institute of Financial Wellness believes when it comes to financial decisions; never say “Never” never say “Always”…It Depends.


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