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Considering Income Tax Rates in Retirement
Many of us have looked to retirement as a time when we become free–well, more free–of the federal income tax burden we carried during our working years. For many retirees, that is the case, But for higher earners and those who have heeded the advice of financial planners and accumulated savings to bridge the gap between pre-retirement wages and Social Security benefits, that’s often not the result. In fact, CNBC Personal Finance Reporter Greg Iacurci notes that “’Substantial evidence’ suggests retirees have lower tax rates than during their working years, according to a 2024 paper published by the Center for Retirement Research at Boston College.” For many folks in this situation, the culprit could be the IRS rules on minimum required distributions from deferred income plans like IRAs and 401ks.
As a result of this tax conundrum, it becomes increasingly important for income tax obligations in retirement tobe a significant part of the planning process. The Iacurci post, which you can read in full here, stresses this.
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