Trying to figure out retirement is already challenging enough, but if you have to stop and start thinking about your tax situation, you might be in for a challenging time beyond what you might think you can handle. Don’t worry though — with the power of the Internet, you really have the power to figure out just about anything that you want to figure out. You just need to make sure that you get everything taken care of the first time out. You don’t want to just find yourself in a bad position, because there’s really so much that you can do on your own to get things moving in the right direction. A little planning really does help you keep your taxes in line. When you stop working, it’s absolutely important to make sure that you focus on keeping your money around as long as possible. Lowering your taxes definitely helps you meet this goal nicely.

So, in order to do that you really need to understand how your retirement income is actually taxed. You’re probably going to have retirement coming from a lot of different places. You might have Social Security benefits, self employment income, pensions, annuities, IRAs, and other retirement plans.

Social Security benefits are tricky, because the tax situation is going to depend on what your total yearly income was. If the only source of your income was Social Security, then you’re not going to have to worry about taxes at all. However, if you have other sources, that’s when you need to make sure that you’re calculating your taxes appropriately.

You have to look first at your provisional income. This is actually your worldwide income, which includes tax exempt income. It also includes half of your Social Security benefits.

There are base amounts that are used in figuring your Social Security taxable figures. There are tables listed online, which you should make sure that you look up on your own. Married couples are going to be dinged a great deal — up to 85% of your benefits could be subject to tax. The only way to get around this is filing together.

You have to also make sure that you think about any pensions or annuities that are you in name. We hate to break it to you, but these items may be fully taxable — but it is possible that you might only have partial taxes to pay. It really depends on how you funded the accounts to begin with. If all of the contributions were tax-deferred, then your distributions are going to be fully taxable. However, if you contributed after-tax dollars to fund the plan, then you have some cost basis to go on. Part of the distribution will then be a tax-free recovery of the cost basis and the rest will be taxable income. The IRS talks extensively about this in Publication 575.

Your plan admin can help you calculate the taxable portion of your pension distribution with no problem. Follow up with them in order to make sure that you know what your pension payments are going to be, and what part of the payments are going to be considered taxable income.

When it comes to 401(k) distributions, we have some bad news — this is fully taxable. The reason why these distributions are going to be fully taxable is because they were funded with pre-tax dollars. So therefore it’s a tax-deferred account. As you can see, the IRS makes sure that they definitely get their share of your money, so you might as well figure out how much you’re going to owe them every year.

IRA distributions are going to be determined by the type of method that it was funded by, as well as the type of IRA that you have. Most people have turned to the Traditional IRA, but these distributions are going to be fully taxable. Tax-deductible dollars were used, which means that the earnings are only taxed when they are withdrawn.

Then we move on to the Roth IRA, which is a different story. Distributions from Roth IRAs are totally tax free as long as you meet two basic rules. First, your initial Roth IRA contribution has to be made at least five years before any distribution, and the funds are distributed to you after you reach age 59 and a half.

Even if you’re trying to put off retirement as far as possible to accumulate as much money as possible, you’re going to remember that the law requires that you withdraw the funds sometime. After all, that’s the only way that you’ll pay taxes on any money. You must begin your withdrawals by April of the year after you reach 70 and a 1/2.

The only accounts that are not required to be tapped in this way are Roth IRAs and Roth 401(k) accounts. They aren’t subject to the minimum required distribution rules.

The minimum amount that has to be distributed is your account balance divided by the life expectancy figures published by the IRS. They give you this information in Publication 590 every year, so you should make sure that you check back accordingly. There are also RMD calculators online that can help you crunch the numbers.

So what’s the best strategy then, if you really want to make sure that you have some control over your taxes.

You really want to make sure that you’re using all of your tax weapons to your advantage. You have a standard deduction, personal exemptions and even itemized deduction. You can also weigh your mortgage payments, real estate taxes, and even medical expenses into things.

You can also push more money into your hands during a year where you will have lower taxes. This can keep you from having to pay more taxes down the road.

There is also a new tax credit for taxpayers that are 65 and older. You have to make sure that your adjusted gross income falls beneath certain limits.

Don’t forget that if you sell your primary residence that you can exclude up to 250,000 in capital gains from the sale, or 500,000 if you are married. Interest earned from municipal bonds is also tax-free, which is always a good thing.

There’s a lot of solutions out there to the tax problem, but let’s face it — you’re going to have to pay something. Trying to keep it as low as possible is always good, but you have to realize that you’re going to have to pay something eventually. While you are thinking about filing your taxes, make sure that you’re also thinking about your recordkeeping. Keeping track of all of your receipts is definitely the best way to mind your taxes. Good luck out there!