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1021223-00006-00
Avraham "AY" Rappaport, CLTC
President, Financial Professional
Yaniv "Jay" Natanov
President, Financial Planner
Eli Rappaport
Vice President, Financial Planner
Shlomo Rosenstein
Financial Professional
Ozzie Marizan
Financial Planner
Joseph Greer
Employee Benefits Administrator
Dylan Pinsky
Client Relations Manager
Premier Financial
6395 Dobbin Road, Suite 102
Columbia, MD 21045
Phone: 240-309-6001
Email: dylan.pinsky@prudential.com
Website: premierfinancial1.com
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.1052405-00003-00
Premier Financial is not affiliated with Prudential Financial. Premier Financial sells insurance products of Prudential Financial's affiliated insurance companies in addition to products of non-affiliated insurance companies. Premier Financial is authorized to sell and service certain insurance products of Prudential Financial companies as well as use this material. Premier Financial and its representatives do not give tax or legal advice. Please consult with your own advisors regarding your particular situation. Offering financial planning and investment advisory services and programs through Pruco Securities, LLC (Pruco), under the marketing name Prudential Financial Planning Services (PFPS), pursuant to a separate client agreement. Offering insurance and securities products and services as a registered representative of Pruco, and an agent of issuing insurance companies. 1-800-778-2255. Dylan Pinsky is employed by Eli Rappaport and not The Prudential Insurance Company of America or its subsidiaries.
This newsletter is general educational information provided by a Prudential Financial Professional and is not intended to market or sell any specific products and services, but rather provide general information about the subject matter covered only.
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