Losing Social Security benefits to the tax man is likely inevitable
The age when one starts to claim Social Security benefits along with one’s lifetime earnings are main determinants of monthly Social Security income, and this can be planned for by creating an on-line account with the Social Security Administration. However, income taxes can be a wild card for folks who fail to plan for them. To see if benefits will be taxed, one can calculate provisional income, which is essentially non-Social Security income plus 50% of one’s Social Security benefits for the year. If that total is between $25k and $34k for single tax filers or $32k and $44k for joint filers, then you could be taxed on up to 50% of your benefits. And if your total exceeds $34k as a single tax filer or $44k filing jointly, then you could be taxed on up to 85% of your benefits. Also, 13 states tax benefits to varying degrees. As Maurie Backman notes in this piece, there are some things you can do to lower your tax burden in retirement, but it’s difficult to avoid paying federal taxes on Social Security once your income hits a certain threshold. Full piece here.
The AMAC Foundation offers a free-to-the-public advisory service to all folks ageing into–or already in–Social Security. This service provides guidance in understanding the complexities of Social Security and the myriad rules and regulations associated with the process for claiming benefits, with NSSA-Certified Social Security Advisors available via email or telephone to discuss options. Learn more about this service via the Foundation’s website.