Skip to contentNerdwallet icon
Sign InJoin

Is Retirement Income Taxable? How Much You May Pay

Retirement income is often taxable, but there are notable caveats for Social Security and Roth accounts.

Many, or all, of the products featured on this page are from our advertising partners who compensate us when you take certain actions on our website or click to take an action on their website. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.

The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.

Updated · 2 min read
Kurt Woock
Written by 
Lead Writer & Content Strategist
Tina Orem
Edited by 
Editor & Content Strategist
SOME CARD INFO MAY BE OUTDATED

This page includes information about these cards, currently unavailable on NerdWallet. The information has been collected by NerdWallet and has not been provided or reviewed by the card issuer.

Retirement income from tax-deferred accounts such as 401(k)s, 403(b)s or Traditional IRAs is taxable, as is income from pensions, annuities and Social Security. Roth IRA retirement income typically isn’t subject to income tax. The portion of Social Security subject to income tax depends on total income.

How retirement income is taxed: An overview

Distributions from 401(k)s, 403(b)s, 457(b)s and traditional IRAs are taxable . In other words, if you withdraw $20,000 in one year from your traditional IRA, it would be like earning the same amount from a job.
  • A distribution is not taxed in isolation. Instead, your income tax liability is based on your entire taxable income for that year. For example, a person whose only income for the year was a $40,000 401(k) distribution will have a different tax bill than a person who had a $40,000 401(k) distribution in addition to other income.
  • Federal income tax is determined by your tax bracket. If you live in a state with income tax, you may pay that, too. State income tax rates vary, and some states don’t have income taxes.
  • Each type of retirement account has rules about when you can take a distribution. If you take a distribution too soon, you could face penalties.
When you work, your employer helps manage your tax liability by withholding taxes from your paychecks and remitting them to state and federal tax authorities on your behalf. In retirement, you’ll need to coordinate your own tax payments. That means estimating your taxes for the year, deciding which accounts those funds will come from and how to send your payment to the IRS.
» MORE: Learn how required minimum distributions work
AD
How does your
net worth stack up?

See where you stand compared to households like yours, and get steps you could take to grow from here.

Head, Person, Face
NWWP is an SEC-registered investment adviser. Registration does not imply skill or training. Calculator by NerdWallet, Inc., an affiliate, for informational purposes only.

How retirement income from Roth accounts is taxed

Contributions to a Roth 401(k), Roth 403(b) or Roth IRA are made with after-tax dollars. As a result, distributions you take in retirement typically aren’t taxable. That means you usually won’t pay federal or state income taxes on distributions of any size from these accounts, and the amount you withdraw won’t affect your tax bracket.
For example, if your annual retirement income consists exclusively of a $30,000 distribution from a 401(k), a $20,000 distribution from a Roth 401(k) and $15,000 in annual Social Security payments, only the $30,000 distribution and $15,000 in Social Security may be taxable.
🤓 Nerdy Tip
To avoid paying income taxes on the earnings in a Roth IRA, the account needs to be open for at least five years before you begin distributions.
» MORE: Estimate your Social Security benefits with our free calculator

How Social Security retirement income is taxed

Social Security is usually taxable. But only a percentage of your Social Security retirement benefit is taxed at the federal level . The percentage depends on your combined annual income.
  • If half of your Social Security plus all of your other income is less than $25,000 for individuals or $32,000 for married couples, your Social Security benefit isn’t taxed.
  • If half of your Social Security plus all of your other income is between $25,000 and $34,000 for individuals or $32,000 to $44,000 for married couples, 50% of your Social Security benefits are taxable.
  • If half of your Social Security plus all of your other income is above $34,000 for individuals or $44,000 if you’re married, up to 85% of your Social Security benefits are taxable.
Most states don’t tax Social Security benefits. The states that do tax those benefits have exemptions that may shield some Social Security income from taxes based on age or income levels. These exemptions are often different from the federal exemptions described above.
🤓 Nerdy Tip
Did you know that Medicare Part B premiums are usually automatically deducted from your Social Security retirement checks? Learn more about how much Medicare actually costs.
» MORE: Learn more about taxes and Social Security

How retirement income from annuities and pensions is taxed

Retirement income from pensions, also called defined-benefit plans, is generally taxable . Income from annuities is usually taxable, too. It’s rare, but if you made after-tax contributions to a pension or an annuity, distributions linked to those contributions typically are not taxable.
  • At the federal level, income from annuities and pensions is ordinary income.
  • At the state level, taxes on pension income varies. Remember, any taxes you do owe are based on the state you live in, not the state in which you earned the pension. In other words, if you earned a pension in Wisconsin but now live in Arizona, you should pay attention to Arizona’s tax laws.
» MORE: Search for a local financial advisor
AD
How does your
net worth stack up?

See where you stand compared to households like yours, and get steps you could take to grow from here.

Head, Person, Face
NWWP is an SEC-registered investment adviser. Registration does not imply skill or training. Calculator by NerdWallet, Inc., an affiliate, for informational purposes only.

How retirement income from life insurance policies is taxed

If you are the beneficiary of a life insurance policy, the amount you receive is typically not taxable . Learn about the nuances of life insurance and taxes.

How self-employment income is taxed in retirement

If you decide to strike out on your own in retirement, you’ll probably need to pay income taxes on your earnings plus Social Security and Medicare taxes. In 2025, the first $176,100 of earnings is subject to Social Security tax. In 2026, the first $184,500 of earnings is subject to Social Security tax. You'll also pay an extra 0.9% in Medicare taxes on the portion of your earnings over $200,000 ($250,000 if married and filing jointly).
You’ll pay the same taxes if you work for an employer in retirement, but you and your employer split the Social Security tax (you pay 6.2%, and the employer pays 6.2%).
Also, if you’re collecting Social Security but haven’t reached your full retirement age — 67 for anyone born in 1960 or after — earning income from employment can reduce your Social Security check .
Article sources
NerdWallet writers are subject matter authorities who use primary, trustworthy sources to inform their work, including peer-reviewed studies, government websites, academic research and interviews with industry experts. All content is fact-checked for accuracy, timeliness and relevance. You can learn more about NerdWallet's high standards for journalism by reading our editorial guidelines.
Back to top
More like this
Investment BasicsInvestingSocial Security
NWA small logo
AD
Get matched to a financial advisor for free with NerdWallet Advisors Match. Get started