Tax time is here again. If you’re recently retired, you may be surprised to learn that taxes still play a big role in retirement. Many retirees assume that because they are no longer earning income, taxes won’t be a major expense.
The truth, though, is that taxes are often a significant expense for retirees. Many common sources of retirement income are taxable. Social Security is taxable, as are distributions from traditional IRAs, 401(k) plans and other qualified plans. Pension benefits usually are also taxable.
If you don’t plan ahead, you could find that taxes take a big bite out of your retirement budget. You may have less spendable income than you’d expected, and that could limit your ability to enjoy retirement.