August 29, 2019
Streams of Income in Retirement
By Sylvia Salguero, Financial Advisor

Various streams of income you may receive after you retire are subject to different tax rules and regulations. Below is a basic guide on what to consider in order to be better prepared to pay your taxes in retirement.

Social Security

In case your only income is Social Security, chances are you likely will not pay any taxes in retirement. If you do have other sources of income, then a portion of your Social security benefits is considered taxable income, potentially up to 85%. This is determined by a formula that takes into account the amount of the other income. (Pension, investment income, etc.)

Individual Retirement Accounts

Traditional IRAs, whether they were initially contributory or rollover of a 401(k), 403(b) or 457, are retirement pretax contributions. All withdrawals from these accounts are fully taxable; meaning the amount you take out is added to your income in that calendar year. The amount of tax you pay is determined by the total amount of income you report, the deductions you can apply and the tax bracket you are in. In case you have made after tax contributions to your IRAs, the tax scenario is different, not addressed in this basic guide. If you are lucky enough to have funded a Roth IRA, withdrawals are tax free, if contributions or conversions were done correctly.


Most pension accounts were funded with pretax income; this means that your entire annual pension income will be subjected to taxes. Of course you can arrange to have taxes withheld from your pension check.


If you own an annuity within an IRA or another type of retirement account, the tax rules that apply to retirement accounts as mentioned above, will apply here as well. All withdrawals are considered fully taxable income.

If your annuity is an immediate annuity, a segment of the payment is considered principal and another is considered taxable interest. The principal is the amount you contributed, which is the after tax portion. The annuity company will provide you with the details.

Withdrawals from a fixed or a variable annuity are subject to different taxation rules. Here the initial withdrawals will always be the earnings or investment gains, thus fully taxable. The original contribution you made to these contracts is (also called your cost basis) is distributed last, and is not taxable.

Investment Accounts

This stream of income is investment income from accounts registered as Individual, Joint Tenants or under a Trust. Here taxes are generally paid on interest, dividends and capital gains. This type of income is reported each year on a 1099 statement. The amount of taxes you pay on capital gains depends on your tax bracket. For example, if your tax bracket is 15% or lower, you qualify for zero percent capital gains tax rate.

Note: Above information is intended to be a simple guide to the taxation of the various income received in retirement. For specific tax questions regarding your unique situation please consult a tax advisor.

The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change with notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.

For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.

This information may not be relied on for the purpose of determining your social security benefits or eligibility, or avoiding any federal tax penalties. You are encouraged to seek advice from your own tax or legal professional.