Biggest Tax Surprises for Retirees

The taxman keeps working even after you stop. Be prepared.

You’ve saved for years so you can enjoy a comfortable retirement. Now prepare to give some of that money back to Uncle Sam. Taxes could take a big bite out of your savings, leaving you with less money for living expenses. Here’s a look at how some common sources of retirement income are taxed.

Withdrawals from traditional IRAs and 401(k) plans are taxed as ordinary income, which means at your top tax bracket. Withdrawals of earnings from your Roth IRA, on the other hand, are tax-free as long as the Roth has been open for at least five years and you’re 59 1/2 or older. You can withdraw contributions to your Roth IRA tax-free at any time, since you made the original contributions with after-tax money.

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

To continue reading this article
please register for free

This is different from signing in to your print subscription

Why am I seeing this? Find out more here

Sandra Block
Senior Editor, Kiplinger's Personal Finance

Block joined Kiplinger in June 2012 from USA Today, where she was a reporter and personal finance columnist for more than 15 years. Prior to that, she worked for the Akron Beacon-Journal and Dow Jones Newswires. In 1993, she was a Knight-Bagehot fellow in economics and business journalism at the Columbia University Graduate School of Journalism. She has a BA in communications from Bethany College in Bethany, W.Va.