There are six primary ways you can be taxed in retirement: (1) Traditional IRA or 401(k) withdrawals – this money is always taxed when taken out, no matter at what age; (2) Social Security benefits – whether or not taxed depends on how much you earn otherwise; (3) Pension income – generally taxed as ordinary income but certain military or disability pensions may escape taxation; (4) Investment gains – occurs when property is sold for more than purchased.  This is called a capital gain; (5) Investment income – this can be in the form of rent, dividends or interest; (6) Bank account interest – this is counted as ordinary income.