Stealthy taxes in retirement paid Impact_Partner
Many of us age 50+ have given much thought to retirement and how we will fund it. That includes which investments to pursue and when to rely on income sources like Social Security and pensions.
While a solid financial plan accounts for taxes, there’s a form of taxes that surprises many retirees: The stealthy retirement tax increases often hidden from view.Here’s the surprising thing many don’t realize: The extra taxable income you must take from your accounts may do more than place you in a higher tax bracket; it may also force you to count more of your Social Security as ordinary income for tax purposes.
As a single filer, you will reach higher marginal tax brackets at a lower income level. In 2019, a single person making $39,476 enters the 22% marginal bracket, while a married couple making the same would still be in the 12% marginal bracket. At $168,400, a married couple would be in the 22% marginal bracket, while the single filer with the same income would enter the 32% marginal bracket.
In a fixed bracket system, inflation can force you to withdraw more income to sustain your lifestyle. Inflation may also force you to pay more taxes on your Social Security. Then, once you’re single again, you’ll reach higher marginal brackets at lower income levels.
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