62+ Taxes

Income taxes are affected when you turn 65, go on Medicare, start your Social Security check, start drawing down your IRA, possibly need long term care, and leave money to your spouse or kids.

There are simple ways to minimize the tax of your estate—if you know the mechanics of how various assets are valued and the details of tax law. There is great value in consulting with an expert; mistakes are costly.

Questions we can answer

  • How do income taxes change in retirement?
  • Do I pay taxes on my Social Security?
  • What is the Medicare tax or IRMAA?
  • When do I pay taxes on my IRA and 401(k) money?
  • How can I reduce my income tax in retirement?

Taxes in Retirement

We are forward looking tax planners. Tax planning in retirement is balancing Social Security income, taxable IRA and 401(K) withdrawals, Roth IRA withdrawals, pension income, and withdrawals from regular savings to meet your income needs. Cardinal helps you find the balance that minimizes your total income tax paid.

Cardinal Lessons on Income Tax

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Income Tax: 2025 Tax Sunset

Taxes are at a historical low and are scheduled to go up after the end of 2025. There are ways to minimize the impact of tax increases if you are willing to pay something now to pay less later.

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Income Taxes: Social Security Federal Income Tax

While some people will pay no federal income tax on their Social Security check, others have to pay tax on up to 85% of their Social Security check.

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Income Taxes: 2021 Tax Rates for Retirees

Do you really understand your taxes? Hans goes over the tax rates for 2021 and discusses how retirees can lower their taxable income.

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Income Tax: Required Minimum Distributions

RMDs, or required minimum distributions, could cause this increased tax bill. You need to account for RMDs in your retirement plan.

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Income Taxes: State Taxes in Retirement

Taxes change in retirement. While this is normally due to how you are receiving your income (i.e. Social Security, IRA distributions, etc.), it can also be due to your state’s taxes, which can significantly affect how long your savings last.

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Income Taxes: CFP VS CPA in Retirement

Both a CFP® and a CPA can help you save money and reduce what you pay in taxes in retirement, but they are going to do it in different ways. The best way to make sure you are not paying too much tax in retirement is to work with both a CFP® and a CPA together.

The Cardinal Guide To:
62+ Taxes

Listen to learn:

Up to 85% of your Social Security can be taxed depending on your “other taxable income” in a given year. In 2021, if your combined income is above $25,000 as an individual, or above $32,000 as a couple, some of your Social Security check will be taxed. State taxes on Social Security vary, with some states completely excluding Social Security from state income tax and others taxing it as regular income.

Medicare applies a surcharge to higher-income beneficiaries. IRMAA, or the Income Related Monthly Adjustment Amount, is an additional tax charged on your Part B and Part D monthly premiums. In 2021, if you make over $88,000 as an individual, or $176,000 as a couple, you can be subject to IRMAA charges.

Purchasing long term care insurance has tax benefits. Not only are the benefits paid to you tax-free, but there is a way to deduct some of the premiums paid for long term care insurance.

IRAs and 401(k)s allow you to postpone income taxes, but you can’t avoid income taxes altogether. RMDs must start by age 72. RMDs increase your taxable income, and possibly increase your Social Security and Medicare taxes. Consider using a Roth IRA, or a Roth IRA conversion, to reduce your taxable income in retirement.

There are income taxes even in death. If you leave a traditional IRA or 401(k) to your heirs, they will have to pay the income taxes before they can use the money.

Want more information about taxes in retirement?