Learn tips for retirement tax planning.
Getting ready to retire? Congratulations! Whether it’s a few years down the road or a few months ahead, retirees should take as much care thinking about the tax implications of retirement as they do planning how they will spend their golden years.
The more time you can spending planning the financial aspects of retirement in your last few working years, the better, but even near-retirees can benefit from a review of how taxes will affect them as they switch from a regular paycheck to Social Security, individual retirement accounts, and—for the lucky few—pensions.
Tax policies can change, so keep an eye on any potential shifts. People nearing retirement have some potential tax benefits unavailable to younger people, such as catch-up contributions for qualified accounts. People over 50 can contribute an extra $1,000 to a traditional IRA. For those contributing to a 401(k), 403(b), and most 457 plans, the catch-up contribution is $6,000 on top of the $18,000 contribution limit, for a total of $24,000 (for the 2017 tax year. For 2018, it goes up $500 to $18,500/$24,500). These savings bumps might add a little extra to your retirement and potentially reduce taxable earnings.
When you turn 65, the Internal Revenue Service classifies you as a “senior,” even if you’re still working. You’ll be eligible for certain credits and deductions, and you'll also be able to take a higher standard deduction. On the flip side, certain credits or deductions will no longer apply.
The IRS offers significant information to help seniors and retirees understand taxes. There are rules about how to collect pensions or annuity income, IRAs, civil service or military benefits, and more that seniors need to know. Tax information can be difficult to understand, and the IRS offers free tax help for filers older than 60 years of age through its Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs. When you’re ready to file your taxes, be sure to have ready all the documents you'll need before filing—all sources of income and any deductions you'll be taking.
Even if you’ve had the same accountant for years, your situation is different now that you’re either near retirement or turning 65. Does your accountant know about the special needs for this life stage? Be sure to talk to him or her about your plans for retirement and any questions you may have.
If you think your new tax status could be complex, it may be worthwhile to seek out an enrolled agent—an IRS-licensed tax professional. If you need a new accountant, check with your state's certified public accountant society, the Accreditation Council for Accountancy and Taxation, or the National Association of Enrolled Agents.
Scam artists often target the elderly. The IRS only contacts people by letters; they won’t ask you to send money immediately over the phone with a wire transfer or credit card. To be safe, never give out your Social Security number, credit card number, or personal information to anyone who calls you on the phone. Any threats of arrest, deportation, or suspension of a driver's license over the phone are a scam.
TD Ameritrade does not provide tax advice. Clients should consult with a tax advisor with regard to their specific tax circumstances.
for thinkMoney ®
Financial Communications Society 2016
for Ticker Tape
Content Marketing Awards 2016
TD Ameritrade and all third parties mentioned are separate and
unaffiliated companies, and are not responsible for each other’s
policies or services.
Market volatility, volume, and system availability may delay account access and trade executions.
Past performance of a security or strategy does not guarantee future results or success.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.
Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.
The information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.
TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2019 TD Ameritrade.