Tax liabilities will, of course, differ amongst various accounts and financial products. Depending on your plan type, you may be taxed as interest grows or you may only face taxation upon distribution. The general worry is that taxes may erode meaningful portions of your retirement resources.
Taxes on your earnings can become a problem once you stop earning income from work and begin to draw on your retirement funds.
Your retirement income is exposed to tax erosion, if not strategically funded. This is because most folks forget that these employer funds were pre-taxed, tax deferred investments. Upon disbursement, you will then have to pay taxes at your current tax bracket.
Social Security may also be axed by the tax. Many retirees are surprised to find out that there are instances in which Social Security benefits may be taxable income. Generally, taxation of benefits applies to individuals with additional income, such as wages, interest, dividends, and other taxable income (which is reported on your tax return filed each year).
