What do retirees need to know about their taxes?

If you have recently retired from the workforce, you are entering an exciting new chapter of your life. After working hard for so many years, it is important to spend time figuring out a plan for the next stage of life. One of the factors that are important to take into consideration is how your taxes will change after retirement. Here, we address a few questions that new retirees often have about their taxes.

Is my pension subject to income taxes?   One of the most common surprises regarding pensions is that sometimes, they are subject to income taxes. If the money was not taxed when it went into the pension plan, it is taxable upon collection. However, if you contributed to the plan after the money was already taxed, it will not be when you retire.

How will I be taxed if I take my pension as a lump sum payment? When an individual wants to take a lump sum payment when it comes time to receive their pension, it is important to be aware that part or all of it will be taxed the year that you receive it. Of course, this often results in a large amount of tax in one year so before choosing the lump sum, speak with an accountant.

If you are getting ready to retire, it may be a good idea to speak with an accountant about your financial situation to see how your taxes may change and what your financial situation looks like. Contact our firm today to discuss retirement with an experienced tax professional.

Werdann DeVito LLC is an experienced Certified Public Accountant firm serving clients throughout New Jersey with all of their financial needs. If you need quality assistance with accounting, tax, or consulting services, contact Werdann DeVito LLC today.