Retirement planning,
explained clearly.
From understanding Full Retirement Age to tax implications, gifting property to your children, trusts, RMDs, and the free tools that actually help you plan — everything seniors need in one place.
What is Full Retirement Age — and why it changes everything
Full Retirement Age (FRA) is the age at which you can collect your full Social Security benefit — not reduced, not increased. It’s set by the government based on your birth year and it affects every retirement decision you make.
(at a 30% permanent reduction)
born 1960 or later
you delay past FRA (up to 70)
(124% of your full benefit)
FRA by birth year
The government gradually raised the FRA from 65 to 67 for people born between 1938 and 1960. If you were born in 1960 or later, your FRA is 67.
Why does this matter? Because every retirement decision — when to claim Social Security, when to take Medicare, when to start drawing from your IRA — ties back to your FRA.
Claiming Social Security before your FRA permanently reduces your monthly benefit. Waiting past FRA permanently increases it. There’s no do-over once you claim.
FRA by birth year:
- Born 1943–1954 → FRA is 66
- Born 1955 → FRA is 66 + 2 months
- Born 1956 → FRA is 66 + 4 months
- Born 1957 → FRA is 66 + 6 months
- Born 1958 → FRA is 66 + 8 months
- Born 1959 → FRA is 66 + 10 months
- Born 1960 or later → FRA is 67
Want to see how much your SS benefit changes by age?
Empower’s free retirement dashboard models your Social Security income at different claiming ages side by side — so you can see the actual dollar difference.
Types of retirement income — and how they work together
Most seniors have multiple income streams in retirement. Understanding how they interact — especially for tax purposes — is key to making your money last.
Social Security
A monthly benefit based on your 35 highest earning years. May be partially taxable depending on your total income. Starts as early as 62, maximized at 70.
Up to 85% taxable401(k) / 403(b)
Employer-sponsored plans funded with pre-tax dollars. Withdrawals are fully taxable as ordinary income. Required Minimum Distributions begin at age 73.
Fully taxable withdrawalsTraditional IRA
Tax-deferred retirement savings. Contributions may be tax-deductible. All withdrawals taxed as ordinary income. RMDs required at 73. No income limit to own one.
RMDs start at 73Roth IRA
Funded with after-tax dollars. Qualified withdrawals are completely tax-free — including earnings. No Required Minimum Distributions during your lifetime. A powerful retirement tool.
Tax-free withdrawalsPension / Defined Benefit
A guaranteed monthly payment from an employer based on years of service and salary. Becoming less common but still used in government and union jobs. Typically fully taxable.
Fully taxableHome Equity / Rental Income
Home equity can be accessed through downsizing, a HELOC, or reverse mortgage. Rental income is taxable but can be offset by depreciation and expenses. Often overlooked income source.
Partially taxableTax implications of retirement income
Many seniors are surprised to learn their Social Security is taxable, or that their IRA withdrawals push them into a higher tax bracket. Here’s what you need to know.
Is your Social Security taxable?
Up to 85% of your Social Security benefit can be subject to federal income tax — depending on your “combined income” (adjusted gross income + nontaxable interest + half of SS benefits).
The thresholds haven’t been updated since 1983, which means more seniors pay tax on SS each year due to inflation pushing incomes up.
Note: 13 states also tax Social Security benefits. Most do not.
Federal SS Taxation Thresholds (2026):
- ✓ Under $25,000 (single) — 0% of SS taxed
- ✓ Under $32,000 (married) — 0% of SS taxed
- ⚠ $25,000–$34,000 (single) — up to 50% taxed
- ⚠ $32,000–$44,000 (married) — up to 50% taxed
- ✗ Over $34,000 (single) — up to 85% taxed
- ✗ Over $44,000 (married) — up to 85% taxed
How different retirement income is taxed
| Income Source | Federal Tax Treatment | State Tax | Notes |
|---|---|---|---|
| Social Security | 0–85% taxable | 37 states exempt it | Depends on combined income |
| Traditional IRA / 401(k) | 100% ordinary income | Most states tax it | RMDs are mandatory at 73 |
| Roth IRA (qualified) | Tax-free | Generally tax-free | Must be 59½ and account 5+ years old |
| Pension / Defined Benefit | Fully taxable | Varies by state | Some states exempt govt pensions |
| Investment gains (long-term) | 0%, 15%, or 20% | Varies | Lower rate than ordinary income |
| Rental income | Taxable (less deductions) | Taxable | Depreciation reduces taxable income |
| Home sale proceeds | Up to $250K exempt (single), $500K (married) | Varies | Must have lived there 2 of last 5 years |
⚠️ Medicare IRMAA Surcharge: If your income exceeds $103,000 (single) or $206,000 (married) in 2026, you pay a Medicare Part B surcharge on top of your standard premium. Large IRA withdrawals or a home sale can trigger this — plan ahead with a financial advisor.
Want help modeling your retirement tax strategy?
Fruitful’s Certified Financial Planners specialize in retirement income planning — including Roth conversion strategies, RMD timing, and minimizing your tax burden in retirement.
Required Minimum Distributions (RMDs) — what you must take out
The IRS requires you to withdraw a minimum amount from most retirement accounts each year starting at age 73. Missing an RMD triggers a 25% penalty on the amount you should have taken.
How RMDs work
Each year, the IRS requires you to withdraw a minimum amount from your Traditional IRA, 401(k), 403(b), and most other retirement accounts. The amount is calculated by dividing your account balance by a “life expectancy factor” from IRS tables.
The older you are, the higher the percentage you must withdraw — because the IRS expects you to draw down the account over your remaining lifetime.
Roth IRAs do NOT have RMDs during your lifetime — a key advantage of Roth accounts. Inherited IRAs have their own RMD rules.
The penalty: If you miss an RMD, the IRS charges 25% of the amount you should have withdrawn. This was reduced from 50% by the SECURE 2.0 Act.
RMD Rules at a Glance:
- Starts at age 73 (changed from 72 by SECURE 2.0)
- Required from: Traditional IRA, 401k, 403b, 457b
- NOT required from: Roth IRA (owner’s lifetime)
- Calculated using IRS Uniform Lifetime Table
- Multiple accounts? Calculate separately, can withdraw from any
- First RMD can be delayed until April 1 of the year after you turn 73
Approximate RMD percentages by age
Estate planning, gifting, and trusts — what seniors need to know
How you pass assets to your children and grandchildren has significant tax, legal, and Medicaid implications. These decisions deserve careful planning.
🎁 Annual Gift Tax Exclusion
In 2026, you can give up to $18,000 per person per year tax-free — to as many people as you want. A couple can give $36,000 per recipient annually. These gifts don’t require filing a gift tax return.
- No gift tax for the giver or receiver
- Doesn’t count against your lifetime exemption
- Can give to multiple people simultaneously
- Direct tuition or medical payments are also excluded
⚠️ Gifts within 5 years of applying for Medicaid may affect eligibility.
🏠 Gifting Property to Children
Transferring your home or investment property to your children during your lifetime has important tax consequences that many seniors don’t consider.
- Children receive your cost basis — if you paid $100K and it’s worth $400K, they inherit your $100K basis
- If they sell, they pay capital gains on $300K
- Inherited at death = “stepped-up basis” to current value — potentially $0 in capital gains
- Medicaid look-back period: transferring property may disqualify you from Medicaid for up to 5 years
⚠️ In most cases, inheriting property at death is more tax-efficient than receiving it as a gift.
📜 Trusts — What They Do and When You Need One
A trust is a legal arrangement where a trustee manages assets for beneficiaries. Different trusts solve different problems.
- Revocable Living Trust: Avoids probate, maintains control during lifetime, can be changed
- Irrevocable Trust: Removes assets from your estate — useful for Medicaid planning and estate tax reduction
- Special Needs Trust: Protects a disabled beneficiary’s government benefit eligibility
- Charitable Remainder Trust: Income for life, then assets go to charity — with tax deduction now
⚠️ Trusts must be set up properly by an attorney — DIY trusts often fail.
📋 Essential Documents Every Senior Needs
These four documents are the foundation of any estate plan. Without them, your family may face court intervention and delayed access to your assets.
- Will: Directs distribution of your assets after death
- Durable Power of Attorney: Names someone to manage your finances if you’re incapacitated
- Healthcare Proxy / Medical POA: Names someone to make medical decisions for you
- Living Will / Advance Directive: Specifies your end-of-life care wishes
⚠️ Beneficiary designations on IRAs and life insurance override your will. Review them regularly.
💡 The stepped-up basis rule: When your heirs inherit assets at your death, the cost basis “steps up” to the current market value. This eliminates capital gains tax on all appreciation during your lifetime. This is one of the most powerful estate planning tools available — and one reason why gifting highly appreciated assets during your lifetime can backfire.
Free tools to help you plan
These are the tools we recommend to seniors who want to take action on what they’ve learned on this page.
Empower — See Your Full Retirement Picture
Connect your SS income, IRA, 401k, and spending in one free dashboard. Model different claiming ages and withdrawal strategies to see how long your money lasts.
Fruitful — Get Expert Retirement Guidance
Fruitful pairs you with a CFP who specializes in retirement. Get help with RMD planning, Roth conversions, estate strategy, and Social Security timing. Flat monthly fee — not % of assets.
ReadyRx — Save on Prescription Costs
Compare prescription drug prices across pharmacies instantly. Many seniors save $50–$200+ per prescription. Free to use, no signup required.
GoHealth — Compare Medicare Plans Free
Open Enrollment runs October 15 – December 7. Compare every Medicare Advantage and Supplement plan in your ZIP code side by side. Free, no obligation.
2026–2027 Benefit Deadlines — all programs
Medicare, Social Security, SNAP, and Medicaid deadlines in one place. Bookmark this page.
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