As households approaching retirement examine the resources they will have available, they may forget that not all these resources belong to them. A new issue Brief published by the Center for Retirement Research at Boston College estimates the size of the tax burden for households at different income levels.
Households face taxes on most components of their retirement income, including benefits from Social Security, payouts from traditional employer-sponsored retirement plans and capital gains taxes on any financial assets
that they sell to support retirement consumption.
While the results show that taxes for most households are negligible, the burden rises to 11 percent for the top quintile, 16 percent for the top 5 percent, and 23 percent for the top 1 percent.
“Thus, for many households reliant on 401(k)/IRA or other financial assets for security in retirement, taxes are an important consideration,” says the Brief. “Understanding the size of this liability can help individuals assess their own retirement security and also inform research on trends in wealth and on how wealth affects retirement decisions.” Read the full report.
New Study Measures Taxes Retirees Owe on Their Retirement Income
