In retirement, you no longer pay into Social Security and Medicare as well as contributing into a 401(k) or IRA. However, This does not mean you WON'T pay taxes on your retirement income. For many retirees, their tax bracket will be higher when they are collecting Social Security, perhaps a pension and eventually Required Minimum Distributions (RMDs) from their tax deferred retirement accounts (401(k), IRA, SIMPLE IRA, SEP IRA, 403(b)) than it was when they were fully employed.
The income you receive in retirement has a direct impact on your Medicare premium costs. Medicare Income-Related Monthly Adjustment Amount (IRMAA) is an amount you may pay in addition to your Part B or Part D premium if your income is above a certain level. The Social Security Administration (SSA) sets four income brackets that determine your (or you and your spouse's) IRMAA. When it comes to IRMAA, "if you're in for a penny, you're in for a pound!"
At OWL Private Wealth Advisors, we believe in proactively planning for your retirement income AND retirement tax issues BEFORE and IN retirement. We work with your tax preparer to ensure you are making the BEST decisions possible for when work has become optional.
“This piece is provided for information only and is in no way tax advice. While every effort has been made to ensure accuracy, only the IRS tax code itself should be considered official.”
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Not all income is created equal in the eyes of the IRS. There are FOUR separate tax buckets that income can go in, and great tax planning is all about being intentional. To come out ahead on taxes we need a plan for how and when we fill and empty these buckets.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Private Wealth Services, LLC. OWL Private Wealth Advisors is a member firm of Kestra Private Wealth Services, LLC. And affiliate of Kestra IS. OWL Private Wealth Advisors and Kestra IS are not affiliated. Kestra IS and Kestra AS do not provide tax or legal advice. https://www.kestrafinancial.com/disclosures
Tax Buckets Worksheet