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Retirement Planning and the 10 Things You Need to Know about Taxes in 2022

Today, 57% of retired Americans rely on Social Security income. However, the average annual Social Security benefit for retired workers was only $18,528 in 2020. Meanwhile, average annual spending by Americans older than 65 was $47,579. This means that to survive, retirees need to have supplemental income to make up the difference. Unfortunately, it’s not coming from pensions as they comprise only 4% of the main source of retirement income. Therefore, we need to do everything we can to ensure that we have enough money in our investment portfolios – yet despite the availability of employer-sponsored retirement products for people to participate in, approximately 37% of the 162 million eligible workers actively participate in a 401k.

You worked hard your entire life and now you are retiring. Some people retire not because they want to, but because they are older and no longer allowed to keep their job, or they become incapable of completing the tasks, or they’re forced to retire because of health reasons. The ideal scenario is retiring because you want to. Whatever the reason, having the right amount of money during your retirement years to fit your lifestyle is hard to achieve unless you’re careful with your investments.

Another troublesome factor is when your investments lose money to taxes and administration fees paid to the companies that manage your money. The good news is there are ways to reduce your expenses, earn more money for your retirement, and develop a tax strategy. Here are 10 ways to plan for your retirement income to ensure you get the best returns.

Table of Contents

1. Tax Overview With Social Security

2. Overview of Retirement Products and Implications for Taxes

3. Investment Vehicles and Retirement Products

4. The HSA – The Retirement Account That Is Not a Retirement Product

5. Brokerage Accounts: How do you use them?

6. Tax Rates for Long-Term Capital Gains 2022, from the IRS

7. Roth IRA Conversion

8. Getting the Most Out of Your Retirement Funds

9. How to Invest Your Money

10. Where to Invest Your Money When Given an Option on Management Companies

**This post contains affiliate links and On the Move with Liza and Stephen will be compensated if you purchase after clicking on our links, with no cost to you.


Real quick, before reading this blog post consider reading Road to Retirement in Seven Steps first. It was created to explain how to understand your personal finances and get you on the road to financial freedom. I highly recommend completing the entire post before reading this one as it has key information on how to get started with your finances. It goes over debt, income, and ways to find money to invest in the stock market.

Additionally, How to Invest in the Stock Market in Six Simple Steps goes over the key components of investing and how the stock market works. Also, How Much Do I Need to Retire? is another post that will help you understand the amount of money you need to retire so you can set goals and get headed in the right direction. While these are not required readings to understand this post, they do provide context as they were written as a series.

Finally, I make the recommendation to use the financial app called Personal Capital to help you understand and monitor your finances. You can read my review on Personal Capital here.

Okay, thanks for reading. Now, on to this blog post on the 10 Things You Need to Know About Retirement Planning and Taxes in 2022.


Tax Overview With Social Security

Tax planning is such an important part of your retirement planning, and the impact can be considerable. Every financial transaction we make has a tax implication. The more knowledgeable you are about taxes' impact, the better decisions you will make. This is highlighted even more while you are in retirement because you are no longer working and every dollar counts. This post will get you headed in the right direction. (Working with a tax accountant is a good idea to help you go deeper into your specific circumstances.)

Let’s start with Social Security and how it is taxed.

Social Security income is subject to federal, state, and local income taxes depending upon where you reside. While many states do not tax Social Security, where you live in retirement should be a consideration in retirement planning.

Next, The IRS (Internal Revenue Service) looks at how much provisional income you have and requires you to include 50% of your Social Security as part of the equation. Provisional income is defined by the IRS as the sum of your wages, taxable and non-taxable interest, dividends, pensions, self-employment earnings, and any other income. So, that means you need to include all income plus 50% of your Social Security income.

Here is an example of how it works:

Provisional Income: $40k

Social Security Income: $20K

Social Security Income at 50%: $10k

Provisional Income plus 50% Social Security Income: $50k

Based on this example, there is a total income of $50k according to Social Security equation.

If you hit certain income thresholds as indicated in the table below, you will have to pay income tax on 50% of your Social Security payouts, and if you surpass that threshold, it jumps to 85%. Here are the thresholds where taxpayers may be taxed according to the IRS for 2022:

Let’s be clear about what this table is saying. If you are married, filing jointly, and have income greater than $44,000, or if you’re filing single with income more than $34,000, you will be taxed on 85% of your Social Security benefit. This means that despite how much you contributed to Social Security over the years, you can be taxed at 85%. Remember that this is income, not expenses. If your expenses exceed those thresholds, you better have other income sources.

Looking at the above equation, your Social Security would be taxed at 85%.

One exception is that a Roth IRA withdrawal does not count toward income and isn’t taxed by Social Security, which is a key part of your retirement strategy – more on that later.

Overview of Retirement Products and Implications for Taxes

There are several places where you can invest your money in preparation for retirement. However, we are going to focus on the main investment vehicles and their features so you can take advantage of each one. These features impact your money going in as well as its growth, withdrawals, and taxes. Keep in mind that these retirement products are investment vehicles for long-term investments. They have tax advantages that allow your money to grow tax-free or tax-deferred for years.

Investment Vehicles and Retirement Products:

  • 401k: Employer-based – employee contribution plan

  • Traditional IRAs: Individual Retirement Accounts (IRA) – individual contribution plan

  • Roth IRAs: Al