Sounds like an oxymoron, right? When most people think of retirement, they envision a laidback, luxuriously glowing time in their lives. A time that is spent enjoying the things in life that matter most to you whether it’s travel, grandkids, hobbies, or frankly, just rejoicing in the fact you no longer have to work. After all, they don’t call it the Golden Years for nothing.
But as tax season creeps up, it is critical to note that just because you are no longer working does not mean you don’t have to worry about taxes. In fact, your taxes play an even bigger role in your retirement years than you might think considering your income at this point in the game is for the most part fixed.
So, where do you need to keep an extra sharp eye to ensure the government does not steal your retirement dreams?
Here are a few places to keep a close watch:
- Your income. The government taxes any income you have and during retirement, your income could be coming from a few different places: a part-time job at your local art studio, social security, pension, and any portfolio assets.
- Required minimum distributions. If some of your income is from IRAs and the like, you are required to take a minimum distribution from them which can be taxed. Make sure to know exactly how much and when to take it out otherwise you WILL have to pay a penalty!
- Investment interest. Interest earned off of savvy investing can provide stable income during your retirement years, but it, too, can and will be taxed. Certain investments are tax free such as municipal bonds and qualified dividends and capital gains are taxed at lower rates.
Time is money, as the saying goes, and during retirement both are high commodities. Keep more of your money and enjoy more of your time living out your retirement dreams by watching these parts of your finances closely. And for one-on-one personal tips, contact us to see how we can help.