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The Social Security Tax Torpedo – What it is & how to avoid it
The spike in taxes retirees often experience after receiving Social Security income is the infamous tax torpedo. As Ashley Kilroy explains, 50-85% of your Social Security check may be taxable, depending on income level and life circumstances. Further, your Social Security income can increase your marginal tax rate, meaning the top portion of your income enters the next tax bracket. As a result, unsuspecting retirees can pay heavier taxes than anticipated, and their Social Security benefits provide less of a financial boost than expected. The advice to sidestep the torpedo involves one or more of these suggestions: 1. Use a Roth IRA; 2. Live in a Tax-Friendly State; 3. Give Your IRA Income to Charity; 4. Buy a Qualified Longevity Annuity Contract (QLAC); 5. Compare Your Income Level to Tax Brackets; 6. Delay Social Security. 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.