When you're planning for retirement, it's fun to contemplate all the travel, rounds of golf, entertainment and restaurant meals you have ahead of you. You've earned it! You may also want to financially help your children and grandchildren. However, many retirees don't take into consideration the cumulative impact of federal and state income taxes on withdrawals from their nest eggs. That's a mistake, because how retirement income is taxed is an important consideration.
The U.S. tax laws consider most forms of retirement income fair game, including Social Security benefits, pensions and withdrawals from your 401(k)s and traditional IRAs. And unless you live in a state without an income tax, you can expect your home state to ding you in retirement as well. (Taxes on retirees vary from state to state, so make sure you check our Retiree Tax Map for each state's overall tax impact on your retirement income.) Do yourself a favor before you retire and take a look at the federal income taxes you're likely to face on 12 common sources of retirement income.
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