When retirement is on the horizon, it’s likely the time has come for you to start receiving your Social Security benefits. Do you know the impact those benefits can have on your tax return? Many retirees rely on Social Security benefits to replace a sizable portion of their wages once they exit the workforce. This means that when building an income plan for retirement you’ll want to fully understand if these benefits carry a tax obligation, and if so, how much.
So, who pays taxes on Social Security benefits? In short, anyone with a combined income above $34,000 ($44,000 for joint filers) in retirement. If your combined income exceeds this limit, you could be responsible for paying taxes on up to 85% of your benefits. The IRS offers a handy formula to help retirees determine their combined income:
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To give you a good idea of what counts as income when you’re not working anymore, it’s essentially any taxable money that comes your way after you retire – wages, self-employment, dividends, etc. If you’re like most people on the verge of leaving the workforce, nailing down your income in retirement may feel
overwhelming. By sitting down together, we can add it all up so you know just what to expect. Even better news: it’s possible to reduce or potentially eliminate your tax obligation on Social Security benefits by reducing your adjusted gross income or nontaxable interest, which is also something we can work through. It’ll be well worth our while to sit down and determine which sources of income you should tap into to cover your expenses in retirement. In doing so, you’ll gain a better sense of how much of your retirement income will likely come from Social Security and how much you’ll pull from other sources. Understanding this balance is an important step in supporting your long-term retirement plans, so let’s put some time on the calendar and take that step together.
Investment advisory services offered through Regal Investment Advisors, LLC, an SEC Registered Investment Advisor. Registration with the SEC does not imply any level of skill or training. Bailley Group Wealth Management is independent of Regal Investment Advisors.
“My experience with Paul over the years has been nothing but fantastic. He takes the time to explain the pros and cons of any decision and is always quick to return calls. Highly recommended.” – Richard Y.
“Over the past 5 years, my family and I have had the pleasure of working with Paul. We frequently meet to review our financial plans as our financial situation evolves and he is always available to answer the questions in between. He reviews all the ups and downs of the various plans and options available every time, allowing us to make informed decisions. He provides solid advice that gives me and my family peace of mind knowing we have planned well for our future. I can honestly recommend Bailley Group Wealth Management with great confidence.” – Olaf K.
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