Retirement represents a major turning point in one's life.
One factor that remains, regardless of this new chapter in your life, is the presence of taxes. If you’ve followed the advice of retirement plan advisors, you should already be saving in tax-advantaged retirement accounts. Taxes are deferred in these accounts until you take money out in retirement. Taxes on income from other sources, such as Social Security, pensions, and earnings from part-time employment, can potentially be an issue for you. Considering these variables, it makes sense to develop a customized retirement income plan.
When should you start taking Social Security benefits? The benefits are increased by delaying withdrawals, ideally until age 70. However, keep in mind that if your annual income is more than $34,000, you may be required to pay taxes on a significant portion of your Social Security income, up to 85%.
Understanding your tax bracket in retirement is crucial. Since there is a chance that the tax bracket will drop, it is critical to track income levels from Social Security, pensions, and annuities as well as withdrawal amounts to make sure you don’t accidentally move into a higher bracket.
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