EVEN IN RETIREMENT YOU PAY TAXES!
We have a "pay-as-you-go" tax system in the
U.S. This means that the IRS requires you to pre-pay tax
on income as you earn it; if you don't pre-pay enough,
you could owe an underpayment penalty. Computing lax projections
ahead of time can help you find ways to avoid the penalty.
Generally you will have two options for meeting the pay-as-you-go
requirement:
- If you
get a pension, ask the payer to withhold income tax
on your behalf (in the some manner on employer withholds
for an employee)
- Make
estimated tax payments on a quarterly basis.
Either of these methods is acceptable to the IRS.
Return
to Tax Considerations for Retirees
Social
Security and Your Retirement
IRA Accounts and Your Retirement
Pension Plan Distributions
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