How These 7 Types of Retirement Income Are Taxed

#6 Life Insurance Proceeds

Generally speaking, even before you reach retirement age, you should look into getting some sort of life insurance. After all, life is becoming more unpredictable, and it is better to have something than nothing. If you happen to be named the beneficiary on someone’s life insurance and you have to receive the benefits in retirement, then we have talked about how these proceeds are going to be taxed.

Generally speaking, if you are the beneficiary of such a policy after the person has died, the income it would generate is not going to be taxable, and there is little headache associated with it. Yet, this changes if you are the holder of the policy and you have surrendered it in order to get the cash. Since these proceeds are not coming to you following someone’s death, then some of them are going to be taxable.

The best way to make sure that you know if the life insurance proceeds are going to be taxed is to use the IRS online tool that will help you determine everything. Just make sure you have the appropriate information they ask you for at the start of the tool!