Welcome to another edition of Financial Fitness Fridays, where I share a few words of financial wisdom to help put YOU back in the driver’s seat of YOUR financial future.
This week’s topic is sure to anger a lot of seniors and pre-retirees!
Do you realize that if you don’t structure your retirement income plan correctly, then you could cause up to 85% of social security benefits to become taxable? – Motley Fool 1
According to this article from the Motley Fool, Social Security recipients will lose nearly $39 BILLION in benefits, because they’ve allowed their Social Security to become taxable.
What a tragedy!
Imagine that. This government program – that’s been mismanaged, that they’ve stolen from, where they give you a paltry return, (you probably could’ve saved and invested that money better yourself)… and now you have to give a bunch of that money back to the government because you have been “too successful” or make “too much money” in retirement?
And here’s the thing – this isn’t voluntary! They MAKE you participate in this program!
**Image is a hypothetical example**
Here are the inputs for Social Security taxation, called the “Provisional Income” calculation:
- Half of the household social security benefit
- Include municipal bond interest
- Include all forms of taxable income (pensions, distributions from IRA, 401k, etc.)
Here are the thresholds, for a married couple:
- Joint provisional income over $32,000: will cause as much as 50% of SS benefit to be taxable
- Joint provisional income over $44,000: will cause as much as 85% of SS benefit to be taxable
I don’t think that many people would consider making $44,000 per year “well to do,” but if your provisional income crosses that threshold, then 85% of your social security benefit becomes taxable.
If that happens, you will be giving much of that benefit back to the government, costing you tens of thousands (maybe even into the hundreds) of lost benefits due to taxation.
Wouldn’t preventing taxation of this vital benefit be an important part of your retirement income plan? Since you MUST participate, doesn’t it make sense to plan for how to keep more of your benefit?
Now for some GOOD NEWS! Here’s the exciting thing: there are ways to take advantage of the rules, regulations, and guidelines in the US Tax Code to prevent this from happening!
What if I could show you a way to structure your retirement income where the distributions are considered tax-exempt? In addition, those distributions aren’t counted in the provisional income calculation, thus keeping you beneath the threshold & keeping your SS benefits income tax free?
What if we could keep more for you, and give less back to the government? Wouldn’t that help you to get ahead, maintain a higher standard of living, and live a more comfortable retirement?
If you’re interested in learning how to do this, you have me on your side, and I’m here to help.
Thank you for taking the time to read this blog post. Please let me know your thoughts by replying or commenting.
P.S. If you haven’t checked it out yet, please stop by my mini online seminar How Retirees and Pre-Retirees Can Potentially Avoid Going Broke While Keeping Their Nest-Egg Secure! Tons of great information and bonus is it is 100% COMPLIMENTARY!
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