In talking with many people that are preparing for retirement, a conversation that always comes up is the topic of Social Security. Last week I shared Myth #2: Social Security is only a retirement program and Myth #3 If you earn money after you retire, you will lose your Social Security benefit . This week I want to clear up another myth that is prevalent in many people’s minds.
MYTH #4: Social Security benefits are not taxable.
TRUTH: You may have to pay taxes on your Social Security benefits if you have other income.
If the only income you had during the year was Social Security income, then your benefit generally isn’t taxable. But if you earned income during the year either from a job or from self-employment or had substantial investment income, then you might have to pay federal income tax on a portion of your benefit. Up to 85% of your benefit may be taxable, depending on your tax filing status for example do you file as a single person or do you file as married filing jointly and the total amount of reportable income you have. There are many strategies that we talk about to help people keep more of their Social Security Benefit Income.
Here is a little test for you if you want to see if your Social Security Benefit income is being taxed. Pull out your last 1040 US Tax return and look at box 21A and 21B.
Box 21A shows you how much Social Security you received during the year. Box 21B shows you how much of that income is taxable. So if you have a dollar amount in Box 21B you need to educate yourself on ways to reduce or eliminate that taxable event. It can be done, but you have to understand how the tax code works.
For most Americans, Social Security is an important part of your retirement planning. Keeping it instead of paying a portion back to Uncle Sam is a goal that you should try to achieve.
So make sure you have your financial affairs in order and a good way to start this process would be to contact John Bearss by e-mail at lifetime @ donet.com or call him toll free at (888) 914-9909.
Disclaimer: Investing involves risk. Always do your own due diligence and consult a trusted financial professional before making any investing or financial decisions. John Bearss is a retirement specialist. He is also a registered representative of and offers securities through SICOR Securities, Inc., Member FINRA, MSRB, SIPC, 6500 Poe Avenue, Suite 105, Dayton, OH 45414 | (937) 890.3101. Neither SICOR Securities, Inc., Lifetime Decisions Management nor their representatives provide legal or tax advice. Please consult your CPA or qualified tax advisor before making any decisions. Lifetime Decisions Management, Inc. and SICOR Securities, Inc. are not affiliated.