Do You Pay Federal Taxes on Retirement Income?

Shawn Plummer

CEO, The Annuity Expert

Do You Pay Federal Taxes on Retirement Income?

Yes, you generally do pay federal taxes on most retirement income. However, there are some exceptions based on the type of retirement account.

Types of Retirement Income and Tax Implications

  1. Traditional IRAs and 401(k)s: Income from these accounts is taxed at your regular income tax rate as you withdraw it. This is because the contributions to these accounts are often made pre-tax, meaning taxes are deferred until withdrawal.
  2. Roth IRAs and Roth 401(k)s: These accounts are funded with after-tax dollars. As a result, withdrawals are typically tax-free, provided certain conditions are met, such as the account being at least five years old and you being over 59½ years old.
  3. Pensions: Most pensions are taxable. You pay taxes on the amount you receive each year, much like regular income.
  4. Social Security Benefits: Whether these benefits are taxable depends on your overall income level. If Social Security is your only source of income, it’s likely not taxable. However, if you have other income, a portion of your benefits may be taxable.
  5. Annuities: The taxation of annuity payments depends on whether you purchased the annuity with pre-tax or after-tax dollars. If it’s purchased with pre-tax dollars, like in a traditional IRA, then payments are fully taxable. If purchased with after-tax dollars, only the earnings portion of the withdrawals is taxed.

Tax Planning for Retirement

Effective tax planning can help minimize the amount of taxes you’ll owe on your retirement income. Strategies include:

  • Roth Conversions: Converting traditional IRA funds to a Roth IRA can offer tax-free growth and withdrawals.
  • Withdrawal Strategies: Planning the order and timing of withdrawals from different accounts can reduce the tax burden.
  • Diversifying Retirement Accounts: Having a mix of Roth and traditional accounts allows for more flexibility in managing taxable income during retirement.


Understanding how your retirement income is taxed is crucial for effective retirement planning. Knowing the difference between Roth and traditional accounts, along with strategic planning, can make a significant difference in your tax liabilities. For tailored advice on managing your retirement taxes, contact us today for a free quote.

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Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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