Retirement changes where your income comes from. It does not automatically mean a smaller tax bill.

In this short video, Jeff Gove explains why your first full year of retirement can bring a tax surprise and why a withdrawal plan deserves attention before tax season.

Different income sources can add up

Pension payments, traditional IRA distributions, and taxable investment income may all contribute to your tax bill. Looking at each source separately can make it easy to overlook the combined effect.

The tax treatment varies. Pension income may be fully or partially taxable. Traditional IRA withdrawals are generally taxable, except for amounts attributable to after-tax contributions. Qualified Roth IRA withdrawals are generally tax-free. Interest, dividends, and realized investment gains can have different tax treatment.

Withdrawal choices deserve a plan

If you have several types of accounts, deciding where to take money from involves more than checking the available balance. Your spending needs, other income, and the tax treatment of each account all matter.

There is no single withdrawal order that works for everyone. A strategy should consider your current year alongside the years ahead.

The early retirement years may offer flexibility

For some retirees, the period after leaving work but before Social Security and required minimum distributions begin may offer an opportunity to evaluate how to use different accounts.

That opportunity depends on your circumstances. Pension income, investment income, and other household income may already fill much of your tax bracket. Planning can still be valuable after Social Security or RMDs begin.

Start with a first-year income review

Before tax season, discuss these questions with your financial advisor and tax professional:

• What income do I expect from each source this year?

• Which accounts will fund my spending needs?

• How could those withdrawals affect my taxes?

• Do I need to adjust withholding or estimated tax payments?

The goal is to make informed decisions about how to fund retirement and prepare for the taxes that may come with it.

If you are approaching retirement or settling into your first year, contact Stonebridge Wealth Systems to discuss how your income and withdrawal decisions fit into your overall retirement strategy.

This information is for educational purposes only and is not individualized tax or legal advice. Consult your tax professional about your circumstances.