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Tax Liabilities on Retirement Income Sources

Jeffrey L. Wendel

A member of the International Association of Registered Financial Consultants, Jeffrey L. Wendel has served as the chief executive officer of Wendel Retirement Planning since 2001. In this role, Jeffrey L. Wendel provides clients with financial consulting services, including retirement tax planning.

Estimating retirement tax liabilities is complicated since every type of retirement income is taxed differently by the IRS. As an example, Social Security income will be received tax-free by many people, but it may become taxable if the retiree receives a certain amount of income from other sources. Additionally, retirement accounts funded with pre-tax dollars, such as a 401(k), are taxed upon withdrawal.
Similar rules regulate the taxation of pensions. The actual tax rate coincides with the individual’s overall income.
On the other hand, retirement savings vehicles funded by post-tax dollars, such as Roth IRAs or cash-value life insurance, can be withdrawn tax-free. Further, the IRS does not factor income from Roth IRAs when calculating taxes on Social Security benefits.

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