For many clients, the two most important sources of retirement income are Social Security benefits and distributions from retirement accounts, including required minimum distributions after age 70 ½.
But these two present a tax challenge for advisors.
The rules for calculating taxes on distributions from retirement plans are not the same as those for taxing Social Security. Withdrawals from employer retirement plans and IRAs are taxed as ordinary income, but Social Security benefits may or may not be taxable, depending on a few factors.
Advisors must help their clients create a plan that will optimize both income sources in terms of benefits and taxes.
