Social Security Report

Q & A

My sister and I are both in our 60s. A financial adviser told her that she should stop funding her pretax health savings account because Social Security benefits are based on your taxable income. Is that true? If it is, then should I stop putting 10 percent of my income into my 401(k)? Will that pretax amount affect my ultimate Social Security benefit?

Answer: 

First, don’t stop funding your 401(k). You pay FICA taxes on deferred income that is contributed to these workplace accounts (even though income taxes are deferred). So that income is counting toward the ultimate calculation of your monthly Social Security benefit. As for the health savings account, that income is not subject to FICA taxes, and so it wouldn’t count toward wages used to calculate your benefits, said Ted Sarenski, chief executive of Blue Ocean Strategic Capital LLC, a financial advice firm in Syracuse, N.Y. Read more…

Source: http://articles.chicagotribune.com, October 18, 2013

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