3. Pension
While most senior citizens opt for 401(k) plans, there are still some who rely on pensions, especially those who worked for certain companies or government. If you’re one of them, you won’t escape taxation. If you were hoping to escape the wave of taxes because you’re on a pension, then I have bad news: it won’t happen!
Dear Uncle Sam will tax your pension just like any other savings account meant for retirement. Since you can’t avoid paying taxes on your pension, you can attempt to reduce them as much as possible by not withdrawing more than you need.
4. You’ll likely have to take taxable retirement plan distributions
With the exception of Roth IRAs, where most withdrawals are tax-free, you will be required by the IRS to start taking mandatory distributions once you reach the age of 70. You might not really that money, but unfortunately you’ll be forced by law to withdraw it. And if you don’t want to do it or don’t do it on time, you’ll be fined 50% of the amount.
