Posts Tagged Social Security Benefits

Taxes on Social Security Benefits and How to Avoid Them, Continued

Taxes on Social Security Benefits and How to Avoid Them, Continued

An article on kiplinger.com offers some strategies to avoid, or at least mitigate, taxes on Social Security benefits. Withdraw money from your tax-free Roth IRAs. Tax-free withdrawals from a Roth IRA or Roth 401(k) are not included in your adjusted gross income. Rolling over money from your traditional IRA or 401(k) to a Roth IRA years before you start receiving Social Security benefits is an excellent way to avoid taxes later in retirement. Of course, you will have to pay income taxes when you make the conversion, but you can tap the account tax-free after that. Purchase a Qualified Longevity Annuity Contract. You can invest up to $130,000 from your IRA or 401(k) in a deferred-income annuity called a Qualified Longevity Annuity Contract (QLAC). The money in your QLAC is ignored when figuring your required minimum distribution, so you can reduce the size of your distribution, lower your income and

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Taxes on Social Security Benefits and How to Avoid Them

Taxes on Social Security Benefits and How to Avoid Them

Many people are surprised to learn that their Social Security benefits can be subject to federal taxation. Whether your benefits are taxed depends on what is known as your “provisional income.” This is your adjusted gross income (not counting Social Security benefits) plus nontaxable interest and half of your Social Security benefits. For people filing as individuals or heads of household with provisional incomes of less than $25,000, Social Security benefits are not taxed. For couples filing joint returns, the figure is $32,000. Unfortunately, individuals with provisional income of between $25,000 and $34,000, or couples filing jointly with provisional income of between $32,000 and $44,000, up to 50% of Social Security benefits may be taxable. In the case of individual filers with provisional incomes above $34,000 or joint filers whose provisional incomes exceed $44,000, up to 85% of Social Security benefits may be subject to taxation. The information above concerns

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When Should You Start Taking Your Social Security Benefits, continued

When Should You Start Taking Your Social Security Benefits, continued

What if you don’t start taking Social Security benefits until after your full retirement age? As you would expect, you’ll be rewarded for this. For example, if your full retirement age is 66, you’ll receive 108 percent of your monthly benefit by waiting until age 67. Wait until the age of 70 and your monthly benefit rises to 132 percent. So, based purely on the numbers, you can see why many advisors recommend waiting. Your benefit is significantly reduced the earlier you start taking it and considerably higher the longer you wait. Now, many people will say, understandably, that they worked long and hard to earn their benefit and want to start enjoying it as soon as possible. There are also certain situations where taking your benefit early makes financial sense. An article on bankrate.com points out that if you are in poor health, with a lower than average life

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When Should You Start Taking Your Social Security Benefits?

When Should You Start Taking Your Social Security Benefits?

Most advisors recommend waiting as long as possible to begin collecting Social Security benefits. Suze Orman, a contributor to AARP Magazine, makes a strong case for this approach. She argues that with people living longer than ever before, 70 is the new 65. What concerns her the most is not funding the first 10 to 15 years of retirement but rather the 10 to 15 years after that. You can read her entire article here. What do the numbers have to say? Of course, every situation is unique. The best time to take Social Security benefits is not the same for everyone. You must consider your particular financial needs, health, post-retirement plans and more in deciding when to take your benefit. Here are some statistics to help you make an informed decision. The first number you need to know is your full retirement ageā€”the age at which you can collect

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