How Taxes Eat Away at Your Social Security Benefits

“Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.” This enduring statement was penned by Benjamin Franklin in 1789, and rings true today, well into the 21st Century. And the truth of Franklin’s observation takes on an even more stark reality for many Social Security beneficiaries who are surprised to learn, when they reach the point of actually drawing benefits after a lifetime of watching FICA taxes reduce their take-home pay, that the tax man is still targeting them.

Enter the ever present federal income tax and its tendency to make up to 85% of one’s monthly benefit subject to a tax levy. “Double taxation!” many folks cry, since they remember that thing called FICA that they had to pay to receive a benefit in the first place. But yes, we’ve reached the point where more than half of the households receiving benefits find a percentage of this retirement income finding its way into their tax liability. And to make matters even more frustrating, the state where you live might also tax your Social Security benefits.

The Motley Fool’s Sean Williams, in a post on their website, takes a look at this taxation issue, explaining the rates and thresholds governing tax liability for Social Security benefits. Read his post here…


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