Key Points Nine states don't have income taxes. Another four states don't tax income from retirement accounts. However, retirees could pay more in other ways in several of these states that don't tax retirement income. The $23,760 Social Security bonus most retirees completely overlook › There's a saying that the most important thing in retail is "location, location, location." The statement is true. A retailer's location can make the difference between success and failure. You could make an ar ...

Core Insights - The article discusses the misconception that taxes will decrease in retirement, highlighting various factors that can lead to higher tax rates during retirement years compared to earning years [11] Group 1: Tax Implications of Retirement Income - Inherited IRAs must be fully distributed within 10 years, potentially increasing a beneficiary's taxable income significantly [1] - The RMD age will increase to 75 in 2033, allowing for more time for investments to grow, which may result in larger distributions and higher tax brackets [2] - Required Minimum Distributions (RMDs) starting at age 73 can lead to increased tax liabilities due to larger annual distributions from pre-tax accounts [2][3] Group 2: Specific Tax Scenarios - The "widow(er) tax" affects surviving spouses, who may face higher tax rates due to being taxed as single filers instead of married couples [4] - Large one-time expenses can lead to higher taxes in retirement if significant pre-tax distributions are taken to cover these costs [5] - Changes in tax codes, such as the expiration of the Tax Cuts and Jobs Act in 2026, are expected to increase tax rates, impacting retirees [6][7] Group 3: Legacy and Tax Planning - Inherited pre-tax money can lead to increased taxes for beneficiaries, especially if received during their peak earning years [9] - Tax planning strategies should consider the timing of income and potential future tax rate changes to avoid unexpected tax burdens [10] - Proactive tax planning is essential to manage retirement tax liabilities effectively, as the assumption that taxes will decrease can lead to inaction [11]

Core Insights - Retirees face significant risks not only from market fluctuations but also from avoidable taxes due to mismanagement of retirement accounts and distributions [1] Group 1: Required Minimum Distributions (RMDs) - RMDs are mandatory annual withdrawals from certain tax-deferred retirement accounts that begin at age 73 under current law [3] - Failing to take an RMD incurs a steep penalty of 25% on the missed amount, which can be reduced to 10% if corrected quickly [4] Group 2: IRA Withdrawals - Excessive withdrawals from IRAs can push retirees into higher tax brackets since retirement account income is fully taxable as ordinary income [5] - Tax diversification is crucial for retirees to balance tax-deferred and tax-free assets effectively [5] Group 3: Social Security Taxation - Many retirees mistakenly believe that Social Security benefits are tax-free; however, up to 85% of benefits can become taxable if provisional income exceeds $44,000 for joint filers [7] - A single RMD or modest capital gain can trigger double taxation on both the distribution and previously untaxed Social Security benefits [7] Group 4: Roth Conversions - Roth conversions are often overlooked by retirees, yet they can be a powerful long-term tax reduction strategy, particularly for those not reliant on RMDs for living expenses [9]

Core Insights - Not all states tax Social Security benefits equally, with some states imposing taxes on withdrawals from Social Security [1][2] - There are 39 states, including Washington, D.C., that do not tax Social Security, making them attractive for retirees [3] Tax-Friendly States for Retirees - Alaska is highlighted as the most tax-friendly state for retirees, having no state income tax or tax on Social Security, although it has a high cost of living [5] - Wyoming also does not tax Social Security or have an income tax, but it has a 4% sales tax, which is higher than Alaska's [9] - Delaware has no state or local tax on Social Security but imposes a graduated income tax on earnings [13] - New Hampshire does not tax Social Security and has no sales tax, but it has a property tax of 1.93% and a 4% income tax on interest and dividends for those aged 65 and older [15]

Core Insights - The recent passage of the One, Big, Beautiful Bill Act includes a temporary tax deduction aimed at reducing taxation on Social Security benefits for individuals over 65, with a deduction of $6,000 for individuals and $12,000 for couples [1] Taxation of Social Security Benefits - Up to 85% of Social Security benefits can be taxed based on household income, with thresholds set at $34,000 for individuals and $44,000 for couples for maximum taxation [3] - Income levels between $25,000 and $34,000 for individuals or $32,000 and $44,000 for couples result in up to 50% of benefits being taxable, while incomes below $25,000 for individuals or $34,000 for couples are not taxed [3] Other Tax Considerations in Retirement - Withdrawals from traditional IRAs and 401(k) accounts are taxable as regular income, which should be included when calculating total income for tax bracket determination [4] - Distributions from Roth IRAs, 401(k)s, and health savings accounts (HSAs) are not taxed, as these accounts are funded with after-tax money [5] Strategies to Reduce Tax Liability - Contributing to a Roth IRA or 401(k) can help reduce future tax liabilities on Social Security benefits, as these accounts allow for tax-free withdrawals [7] - Converting traditional IRA or 401(k) savings to a Roth account incurs taxes at the time of conversion but can lower taxable income in the future, potentially reducing the taxable portion of Social Security benefits [7]

Core Points - Florida is recognized as a tax-friendly state for retirees, particularly due to the absence of state income tax, but federal taxes still apply [1][6] State Taxes - Florida does not impose a state income tax, benefiting retirees by not taxing pensions, 401(k) and IRA withdrawals, Social Security benefits, and investment income at the state level [7] - The state offers various tax breaks, including a homestead exemption that can provide property tax relief of up to $50,000 for permanent residents [3][4] - Residents aged 65 and older can receive an additional property tax break of $50,000, subject to specific requirements [5] Federal Taxes - Federal income tax applies to all earned income, including part-time work, and withdrawals from tax-deferred retirement accounts are taxed as ordinary income [8] - Up to 85% of Social Security benefits may be taxable depending on overall income, and investment income is also subject to federal taxation [8] - Florida does not have a state estate or inheritance tax, but federal estate tax may apply to estates exceeding the federal exemption of $13.9 million per individual in 2025 [9]