Many people assume that once they retire, taxes will become less of an issue. The reality, however, is that seniors are liable for taxes just like working adults.
For example, if you have a traditional IRA or 401(k), the withdrawals you take from that account during retirement will be treated as ordinary income and taxed accordingly. Similarly, if you hold investments in a traditional brokerage account, you'll pay taxes on their associated gains.
In fact, many seniors are surprised to learn that even their Social Security benefits are taxed at the federal level. The only exception is for those with minimal retirement income -- namely, seniors who live on Social Security alone. There are also some states that impose a tax on Social Security -- 13 to be exact. The good news? There are 37 states that don't require seniors to pay taxes on Social Security at the state level, so if you live in one of these, you can retain a bit more of your money.
States that don't tax Social Security
If you live in one of the following states during retirement, you can rest easy knowing that your Social Security benefits won't be taxed at the state level:
For example, if you have a traditional IRA or 401(k), the withdrawals you take from that account during retirement will be treated as ordinary income and taxed accordingly. Similarly, if you hold investments in a traditional brokerage account, you'll pay taxes on their associated gains.
In fact, many seniors are surprised to learn that even their Social Security benefits are taxed at the federal level. The only exception is for those with minimal retirement income -- namely, seniors who live on Social Security alone. There are also some states that impose a tax on Social Security -- 13 to be exact. The good news? There are 37 states that don't require seniors to pay taxes on Social Security at the state level, so if you live in one of these, you can retain a bit more of your money.
States that don't tax Social Security
If you live in one of the following states during retirement, you can rest easy knowing that your Social Security benefits won't be taxed at the state level:
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