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3 Smart Places to Save Now

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24.09.2021

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With Social Security set to deplete one year earlier than expected, taxes on retirement benefits may only get worse, not better. Currently, 15% of your Social Security benefit is tax-free. For the other 85%, it all depends on your “provisional income.” So, it’s important to be able to manage your income in retirement, and one way to do that is to make sure you are saving in the right places.

Provisional income is your gross income – wages, pensions, interest, dividends and capital gains – plus tax-free interest, plus half of your overall Social Security benefit. If your provisional income exceeds $34,000 on a single return or $44,000 on a joint return, up to 85% of your benefits may be taxable at your tax rate (See Calculating Taxes on Social Security Benefits).

Fortunately, there are planning opportunities for retirees and non-retirees alike to help lower that tax burden. Here I discuss three of those strategies, but to learn more about Social Security planning, please join me for a complimentary webinar on Sept. 30, 5 Things You Need to Know About Social Security (register here).

Retirees usually have the bulk of their nest egg in taxable retirement accounts. Withdrawals from traditional IRAs and 401(k)s are considered gross income for the Social Security provisional income calculation. However, qualified withdraws from Roth IRAs are not: They are income-tax free.

Some may want to convert traditional IRAs to a Roth for tax-free withdrawals in the future. There are a few caveats to consider. Those still working can contribute to a Roth IRA if their income does not exceed certain........

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