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Not all types of retirement income are taxed the same. In this short clip, find out how pensions, IRAs, 401(k)s, Social Security, capital gains, Roth IRAs and municipal interest are taxed. Big Al explains why Roth IRAs and municipal interest are the best options (hint: they’re tax-free).

Transcription:

“Here’s another risk – income taxes. There’s a lot of concern that taxes may become higher in the future and it’s important to know how retirement income is taxed. If you look at pensions, IRAs and 401(k)s, they are taxed at ordinary income rates. Those are the highest of tax rates. Social Security is also taxed at ordinary income rates although there is a component of that that is tax-free, about 15% all the way up to 100% tax-free depending upon your income level. Look at this – capital gains, qualified dividends – those get special capital gains treatment which is usually about 15% tax; for some of you there is no tax. The absolute best one is Roth conversions and municipal bonds because those are tax-free, so if we can get some more money in Roth IRAs, Joe, we’d be a lot better off.”

About the Hosts

Joe Anderson

President

CFP®, AIF®

As President of Pure Financial Advisors, Joe Anderson has led the company to achieve over $2 billion in assets under management and has grown their client base to over 2,160 in just ten years of the...

Alan Clopine

CEO & CFO

CPA, AIF®

Alan Clopine is the CEO & CFO of Pure Financial Advisors. He currently shares the CEO role with Michael Fenison, the original founder of the company. Alan is primarily responsible for the day-to-day activities of...