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As you plan for your retirement, it’s important to consider all the potential costs you may face. While we often think of taxes as being an upfront expense, there are several stealth taxes that can sneak up on retirees. Here are six stealth taxes to watch out for:
1. Social Security taxes – Up to 85% of your Social Security benefits can be subject to federal income tax.
2. Medicare premiums – The cost of Medicare Part B and Part D premiums can increase the higher your income, resulting in higher taxes.
3. Required minimum distributions (RMDs) – Once you turn 70 1/2, you must begin taking RMDs from traditional IRAs and 401(k) plans. These distributions are subject to income tax.
4. 401(k) loan repayments – If you’ve taken out a loan from your 401(k) and leave your job or retire with a balance still due, the remaining balance becomes taxable income.
5. State taxes – Depending on where you retire, state income taxes can take a bite out of your retirement income.
6. Inflation – While not technically a tax, inflation can cause the purchasing power of your savings to erode over time.
By being aware of these stealth taxes, you can better prepare for their impact on your retirement savings. Consult with a financial advisor to develop a retirement plan that takes into account all potential costs and expenses.
1. Social Security taxes – Up to 85% of your Social Security benefits can be subject to federal income tax.
2. Medicare premiums – The cost of Medicare Part B and Part D premiums can increase the higher your income, resulting in higher taxes.
3. Required minimum distributions (RMDs) – Once you turn 70 1/2, you must begin taking RMDs from traditional IRAs and 401(k) plans. These distributions are subject to income tax.
4. 401(k) loan repayments – If you’ve taken out a loan from your 401(k) and leave your job or retire with a balance still due, the remaining balance becomes taxable income.
5. State taxes – Depending on where you retire, state income taxes can take a bite out of your retirement income.
6. Inflation – While not technically a tax, inflation can cause the purchasing power of your savings to erode over time.
By being aware of these stealth taxes, you can better prepare for their impact on your retirement savings. Consult with a financial advisor to develop a retirement plan that takes into account all potential costs and expenses.
