Despite the major changes
that retirement is likely to bring, you won’t be able to escape taxes entirely if you have income from a job, a pension, investments,
or Social Security. The irony, of course, is that if you owe tax, it means you have a larger income and so may actually be more financially secure. There are some tax breaks, though, after retirement. When you stop working, you stop paying taxes for Social Security and Medicare. That can add several thousand dollars to your bottom line. If you earn a pension in one state but move to another, you don’t have to pay taxes on the pension income to the state where you earned it. (But you will be a taxpayer in the state where you live.) When you reach 65, you may also qualify for a larger standard deduction when
you file your federal tax return.  Most retirement income is taxed, based on the type of income it is. Here’s an overview of federal rules that apply: Annuity income: A portion of each annuity payment is considered a return of principal and is not taxed unless it was purchased with pretax dollars. Earnings are taxed at your regular rate. Capital gains:   Read more…