How Is Income in Retirement Taxed?

When we stop working, we continue to pay taxes on our income in retirement. How much and what type of tax we pay varies depending on which account the money comes from – and the tax characteristics of that account. Different income streams are also taxed in different ways. Ideally, our retirement savings should be in multiple account types – at least from a tax perspective.

When you retire, how much you pay in taxes can differ from what your neighbors, friends, and relatives pay. That price tag or cost depends on your goals and desired lifestyle. It also depends on what type of accounts you have and where your retirement funds come from.

It’s not easy to build a healthy nest egg you can live off in retirement. Trying to strike a balance between spending to enjoy today versus saving for tomorrow makes it even harder.