Don’t Get Bit By Hidden Taxes in Retirement

hidden taxes

Don’t Get Bit By Hidden Taxes in Retirement

Just about everyone hates taxes. They’re complicated and they often seem too high for moat taxpayers. Keeping track of the constantly changing laws and regulations can be unbearable for many, as well. So what about when you retire? Things will get a lot easier when you quit working, right? Not so fast. The fact is taxes in retirement might be even more complicated than while you’re working. For example,

• You may or may not be taxed on your Social Security benefits.
• Most withdrawals from a retirement plan come with federal income taxes, but state taxes depend on your location.
• Investment tax rates will also likely vary.

These are just a few of the things you will have to consider when you retire. So it’s best to be ready for them.

Social Security Taxes
How are Social Security taxes determined? It will depend on your combined income. Your combined income is determined by your adjusted gross income plus your non-taxable interest plus half of your Social Security benefit. Here’s how it plays out.

Single Filers
• If you have a combined income of less than $25,000 then you will not be taxed on your Social Security benefit.
• If your combined income is between $25,000 and $34,000 you could be taxed on as much as half of your SS benefits.
• If your combined income is more than $34,000 then as much as 85 percent of your SS benefits could be taxed.

Joint Filers
• Under $32,000 no tax• Between $32,000 and $44,000 up to 50 percent tax
• More than $44,000 up to 85 percent tax

To be clear you won’t lose this much of your benefit. The percentages are the amount of your benefit that will be taxed, at your regular income tax rate.

What About State Income Tax
There are 13 states that charge income tax on your social security benefits to a certain extent. There are seven states that don’t tax income, period. If you live in any of the other 30 states it will depend on several factors. Every state has different sales and property taxes, as well, so do your homework if you plan on moving in retirement.

Retirement Plan Distributions
For most retirement accounts the law requires you to start withdrawing money when you reach the age of 70½. These distributions are usually taxed at your normal tax rate. While this is not the case for everyone, for those who have saved a lot for retirement, even the minimum distribution could push them into a hire tax bracket. This could lead to an unexpected tax increase in retirement. For some, it might make sense to transfer some your IRA funds into a Roth IRA before you reach the age of 70.

Seek Help From the Pros
These are just a couple of the tax changes that can come with retirement that you should be aware of. As with any important tax decision, it’s always a good idea to meet with a tax professional and/or a financial planner to be sure you’re properly set up for the future. The fewer tax surprises you have in retirement the better.

For more updates follow GROCO on Facebook

/GROCO
Posted in
The True Value of Your Company May Be Different From What You Think

The True Value of Your Company May Be Different From What You Think

The True Value of Your Company May Be Different From What You Think Approaches to Value Intangible Assets Posted: 3/31/11 I’ve received a lot of inquires asking how to value a company that has yet to generate any revenue, has not reached profitability, and yet, it has a substantial history of expenses. Most are start-up…

To receive our free newsletter, contact us here. Subscribe our YouTube Channel for more updates. Alan Olsen, CPA Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com. GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world. Alan L. Olsen, CPA, Wikipedia Bio GROCO.com is a proud sponsor of The American Dreams Show. American-Dreams-Show-Accounting-firm-in-ca-cpa-tax-advisors-groco-alan-olsen The American Dreams show was the brainchild of Alan Olsen, CPA, MBA. It was originally created to fill a specific need; often inexperienced entrepreneurs lacked basic information about raising capital and how to successfully start a business. Alan sincerely wanted to respond to the many requests from aspiring entrepreneurs asking for the information and introductions they needed. But he had to find a way to help in which his venture capital clients and friends would not mind. The American Dreams show became the solution, first as a radio show and now with YouTube videos as well. Always respectful of interview guest’s time, he’s able to give access to individuals information and inspiration previously inaccessible to the first-time entrepreneurs who need it most. They can listen to venture capitalists and successful business people explain first-hand, how they got to where they are, how to start a company, how to overcome challenges, how they see the future evolving, opportunities, work-life balance and so much more.. American Dreams discusses many topics from some of the world’s most successful individuals about their secrets to life’s success. Topics from guest have included: Creating purpose in life / Building a foundation for their life / Solving problems / Finding fulfillment through philanthropy and service / Becoming self-reliant / Enhancing effective leadership / Balancing family and work… Untitled_Artwork copy 4 MyPaths.com (Also sponsored by GROCO) provides free access to content and world-class entrepreneurs, influencers and thought leaders’ personal success stories. To help you find your path in life to true, sustainable success & happiness. It’s mission statement: In an increasingly complex and difficult world, we hope to help you find your personal path in life and build a strong foundation by learning how others found success and happiness. True and sustainable success and happiness are different for each one of us but possible, often despite significant challenges. Our mission at MyPaths.com is to provide resources and firsthand accounts of how others found their paths in life, so you can do the same.

Does Your Business Need a Buy-Sell Agreement?

Does Your Business Need a Buy-Sell Agreement? What Is Buy-Sell Agreement? Buy-Sell Agreement, also known as a buyout agreement, give the company or other stockholders the option or obligation to purchase the interests of other owners under some specified circumstances called trigger events such as death, departure, or retirement, etc. There are two basic types…

Does Your Company Need a Fairness Opinion?

Does Your Company Need a Fairness Opinion? Although not required by statute or regulation, fairness opinions have become an important component of the board of directors and executives deliberation process as they seek to satisfy their fiduciary duties to shareholders and act with due care in an informed manner. Fairness opinions are prepared for and…

Tax Record Retention Guide

Storing tax records: How long is long enough? Tax Record Retention April 15 has come and gone and another year of tax forms and shoeboxes full of receipts is behind us. But what should be done with those documents after your check or refund request is in the mail? Federal law requires you to maintain…