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Craig Lundquist, MBA, ChFC®, CRPC®
VP of Wealth Management
651-773-2757
Kristin Becker
Senior Administrative Assistant
651-773-2821
Ideal Wealth Advisors
Located at Ideal Credit Union
8499 Tamarack Road
Woodbury, MN 55125
CRPC conferred by College for Financial Planning
January/February 2023
Tax Treatment Varies with Income Sources
Taxation of retirement income is not a one-size-fits-all proposition. How your retirement income is taxed depends on where it comes from and, in some cases, the total amount of income you receive. Knowing how each type of income is taxed can help you and your tax professional plan and potentially minimize the amount you owe.
Social Security Benefits
You may be surprised to learn that a portion of your Social Security benefit will be taxed if your earnings exceed a certain amount. Fifty percent of your benefit is taxable with combined income of $25,000-$34,000 for single filers and $32,000-$44,000 for joint filers. Eighty-five percent of your benefit is taxable once income exceeds $34,000 and $44,000, respectively.Retirement Plan Distributions
Generally, contributions to 401(k), 403(b), 457 or other tax-deferred retirement plans are made with pretax dollars. Once you begin taking withdrawals, you’ll pay taxes on contributions and earnings at your regular income tax rate.One exception is a Roth IRA. Contributions to a Roth are made with after-tax dollars. Withdrawals of principal and earnings are tax free once certain conditions are met.
Pension Income
Most accounts are funded with pretax dollars, so annual income is taxed as ordinary income. However, if any portion of the pension was funded with after-tax money, that portion won’t be taxable.Investment Income
You’ll pay taxes at your regular income tax rate on: interest from maturing certificates of deposit (CDs); checking and savings accounts; money market accounts; corporate bonds; U.S. Treasury bonds; dividends from credit union and similar accounts; annuity earnings; and short-term capital gains on investments held for one year or less.Most qualified dividend income and long-term capital gains on investments held longer than one year are taxed at rates ranging from 0% to 20%, depending on your income.
Municipal bond interest is exempt from federal, and sometimes state, income tax.
Don’t Go It Alone
Your income during retirement will likely come from a variety of sources with different tax treatments. Your financial and tax professionals can help you navigate the maze of the information you’ll need to file your tax return.1-05343485
Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Ideal Credit Union and Ideal Wealth Advisors are not registered as a broker/dealer or investment advisor. Registered representatives of LPL offer products and services using Ideal Wealth Advisors, and may also be employees of Ideal Credit Union. These products and services are being offered through LPL or its affiliates, which are separate entities from and not affiliates of Ideal Credit Union or Ideal Wealth Advisors. Securities and insurance offered through LPL or its affiliates are:
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