Retirement Planning FAQs

  1. What types of retirement income are taxable?

Answer: Taxable retirement income includes pensions, annuities, Social Security benefits (depending on your income level), and distributions from retirement accounts like IRAs and 401(k)s.

  1. Are Social Security benefits taxable?

Answer: Yes, Social Security benefits may be taxable if your combined income exceeds certain thresholds.

  1. How is my pension income taxed?

Answer: Pension income is generally taxable. The taxable amount depends on whether your contributions were made with pre-tax or after-tax dollars.

  1. What is the difference between a traditional IRA and a Roth IRA in terms of taxes?

Answer: Contributions to a traditional IRA may be tax-deductible, but withdrawals are taxed. Roth IRA contributions are made with after-tax dollars, and qualified withdrawals are tax-free.

  1. When do I have to start taking Required Minimum Distributions (RMDs)?

Answer: You must start taking RMDs from traditional IRAs and 401(k)s by April 1 of the year following the year you turn 72.

  1. Are Roth IRA withdrawals subject to RMDs?

Answer: No, Roth IRAs do not have RMDs during the account owner’s lifetime.

  1. Can I contribute to an IRA after I retire?

Answer: Yes, you can contribute to an IRA as long as you have earned income and meet the eligibility requirements.

  1. How are annuities taxed?

Answer: Annuities are taxed based on whether they were purchased with pre-tax or after-tax dollars. Earnings are generally taxed as ordinary income.

  1. What is the Saver’s Credit?

Answer: The Saver’s Credit is a tax credit for eligible contributions to retirement plans, such as IRAs and 401(k)s, for low- and moderate-income taxpayers.

  1. Can I deduct my contributions to a traditional IRA?

Answer: Contributions to a traditional IRA may be tax-deductible, depending on your income and whether you or your spouse are covered by a retirement plan at work.

  1. How are 401(k) withdrawals taxed?

Answer: 401(k) withdrawals are taxed as ordinary income. Early withdrawals before age 59½ may be subject to a 10% penalty.

  1. What is the tax treatment of a Roth 401(k)?

Answer: Contributions to a Roth 401(k) are made with after-tax dollars, and qualified withdrawals are tax-free.

  1. Can I roll over my retirement account to another account without paying taxes?

Answer: Yes, you can roll over funds from one retirement account to another without paying taxes, as long as the rollover is completed within 60 days.

  1. Are there any tax benefits for retirees?

Answer: Retirees may qualify for tax benefits such as the Credit for the Elderly or Disabled and higher standard deduction amounts.

  1. How do I report retirement income on my tax return?

Answer: Retirement income is reported on Form 1040. Specific forms, such as Form 1099-R for pensions and annuities, are used to report different types of retirement income.

  1. What is the tax treatment of Social Security disability benefits?

Answer: Social Security disability benefits are taxed similarly to retirement benefits, based on your combined income.

  1. Can I claim a tax deduction for long-term care insurance premiums?

Answer: Yes, long-term care insurance premiums may be deductible as medical expenses, subject to certain limits.

  1. How are distributions from a Health Savings Account (HSA) taxed in retirement?

Answer: Qualified medical expenses paid with HSA distributions are tax-free. Non-qualified distributions are taxed as ordinary income and may be subject to a penalty.

  1. What is the tax treatment of inherited retirement accounts?

Answer: Inherited retirement accounts are subject to specific rules and may require beneficiaries to take RMDs and pay taxes on distributions.

  1. Can I defer taxes on retirement income by moving to a different state?

Answer: Some states do not tax retirement income, but federal taxes still apply. It’s important to consider both state and federal tax implications when planning for retirement.