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Lower Your Social Security Taxes in Retirement

Patrick Villanova has a piece here that discusses unintended tax consequences of withdrawing money from retirement accounts, no matter the source, but especially from required minimum distributions. Withdrawals can increase the taxes you owe on your Social Security benefits. A retiree in the 22% federal income tax bracket may have to pay a marginal tax rate as high as 40.7%. His solutions include Roth conversions and using other nontaxable income sources to help lower Social Security tax liability, and thus your marginal tax rate. If your income is high enough that you owe taxes on close to 85% of your Social Security, the author suggests withdrawing even more money and taking the tax hit this year. The extra withdrawals can help fund your needs in the years to come and lower your future tax liability. Full article here.

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