Wealth Management Blog | WrapManager | Retirement Income Strategy (4)

Are Your Social Security Retirement Benefits Taxable?

Posted by Michael J. O'Connor | CWS®, Vice President Investments

June 12, 2014

If you generate retirement income from non-Social Security sources, like an investment portfolio or rental properties, your Social Security retirement benefits are probably taxable. It’s important to keep this in mind as you work through retirement income planning with your financial advisor, so you can anticipate what the taxes are and how you should adapt your investment plan to account for them.

Here’s a basic example of how it works:

Let’s say you’re a married couple filing jointly, and your combined Social Security retirement benefits for 2013 were $10,000. You also received $25,000 in income from a pension, and withdrew $15,000 from your investment portfolio.

To determine if your benefits may be taxable, simply take one-half of your Social Security retirement income amount, in this case $5,000, and add it to all your other sources of income: $5,000 + $25,000 + $15,000 = $45,000.

If your income total exceeds $25,000 (single) or $32,000 (married filing jointly), which in this example it does, then part of your Social Security income is taxable. You would most likely have to file a return for your Social Security Benefits received on Form 1040 or 1040A.¹

Have Extra Retirement Income? 3 Smart Ways to Use It

April 26, 2014

Does your Required Minimum Distribution (RMD) exceed your living expenses this year? Or perhaps your income from rental properties, an investment portfolio, or a pension is generating extra cash flow beyond what you need. Here are three smart ways to keep those assets working for you: 1) Re-Invest Your Assets to Help Them Grow Get more out of your money by investing extra cash in your taxable brokerage account, IRA or other retirement accounts, which you can do if you meet certain requirements. (Your financial advisor can help you determine your eligibility.) If your extra income comes from RMDs, your financial advisor may be able to help you fulfill your required distribution by transferring stocks from your IRA into your taxable account. Instead of taking that money in cash, you can fulfill your RMD and stay invested in the market. Another option may be to transfer cash or stock to a qualified charity, in which case charitable giving rules may apply. [+] Read More

Managing Your Retirement Income: What to Do During Down Markets

April 22, 2014

When mapping out the sources and timing of your retirement income payments, there’s an important risk we want to make investors aware of: withdrawing money from your portfolio during down markets. If you’re not careful, withdrawing money while the market declines can significantly impact your portfolio and your ability to meet your long-term retirement goals. This risk is especially palpable if you’re in the early stages of retirement, because it can be difficult to replenish your portfolio over time. During down markets, investors should consider adjusting their withdrawal rates and exploring other sources of retirement income. [+] Read More

Managing Your Retirement: What are Your Retirement Income Sources?

April 14, 2014

JP Morgan research shows that on average, Americans age 65 and over will get two-thirds of their retirement income from Social Security and continued work/earnings. Surprisingly, only 11% of retirement income is expected to come from investment assets. For many high net worth investors, however, this number could be higher if they chose not to work or don’t have pensions or annuities. In reality, your sources of retirement income differ from other investors. Give yourself a better chance of maximizing your retirement income by knowing where it’s coming from and making sure your portfolio is structured accordingly.1 Source of Income at Retirement: Average for Age 65 and Older (Click chart for larger version) Source: EBRI (Employee Benefit Research Institute) Databook on Employee Benefits, Chapter 7. Data as of December 31, 2011. [+] Read More

Create Your Retirement Income Strategy with an Investment Plan

March 28, 2014

An investment plan can serve as a tool to help you create a calculated and dynamic retirement income strategy. Calculated because it takes into account important financial aspects of your life like cash flow needs, investment horizon, and risk tolerance. Dynamic because it can be adjusted as your family and financial needs change. Retirement Income Needs Shape Your Investment Plan Let’s say you are 65, in good health, and have $1,000,000 saved with a long-term goal of growth because you want to pass along assets to heirs. You’ll also need $1,000 of monthly income from the portfolio starting at age 70, to supplement Social Security retirement benefits. [+] Read More

Selling Stocks to Generate Retirement Income? 3 Issues to Consider First

March 18, 2014

Many investors choose to sell shares of stocks in their portfolios every month, or perhaps every quarter, to raise the cash they need for retirement income. This isn’t necessarily a good or a bad method for generating retirement income, but there are three things investors should consider when taking this approach. 1) Tax Implications of Selling Stocks Investors should be mindful of realizing capital gains in their portfolios due to selling stocks. If the shares are being sold at a gain, it could mean having to foot a sizable tax bill the following year. These gains might be offset by selling stocks at a loss in the same year, but some investors may not have a lot of positions that carry a big loss—meaning you’ll be stuck with the tax bill. The current capital gains rate for investors filing jointly and making less than $457,600 is 15%, while anything above that threshold is taxed at 20%.1 [+] Read More

3 Ways to Generate Income in Retirement

February 21, 2014

Here are three approaches to generating the desired amount of retirement income. When deciding which option – or combination of options – is right for you, we’d encourage you to seek the help of a financial advisor. 1) Get the Most Out of Your Social Security Retirement Benefits There are several strategies to consider when trying to optimize how you activate your social security retirement benefits. We’ve written about two methods in particular that may help you increase the size of your Social Security check, if executed correctly. The first is the Restricted Application for Spousal Benefits, and the other is the File and Suspend Strategy. [+] Read More

What is Your Retirement Income Strategy?

February 14, 2014

When thinking about retirement income planning at a high level, it boils down to two main considerations: what are your retirement income sources, and what are your retirement income needs? Answering these questions is an important first step towards creating your retirement income strategy. What are Your Retirement Income Sources? We’ve written before about potential strategies to maximize social security payments, which can help to provide a supplemental boost to your retirement income. But for many investors, a main source of retirement income comes from their investment portfolios. Dividend paying stocks, dividend focused portfolio strategies, fixed income allocations, or selling stocks/portfolio holdings to raise cash are all ways investors can generate income in their investment portfolio. [+] Read More

An Investment Plan Can Help You Monitor Spending in Retirement

January 10, 2014

An investment plan is a tool you can use to help you understand where you stand in retirement at every step of the way. Are you still on track to reach your retirement goals? How likely is it you be able to maintain your current lifestyle throughout retirement? Can you afford your current and potential healthcare costs? How much will you be able to leave behind for your loved ones? A well-constructed investment plan can give you a good sense of the answers to these questions. Instead of figuring it out as you go, you can examine a variety of outcomes to help you make more informed choices. Factoring Spending Goals into Investment Plans Before you can use an investment plan to help monitor your spending in retirement, it’s important to provide detailed answers to some fairly basic questions: what are your income needs/desired income in retirement? How might those needs change over time? [+] Read More

2013 IRA Required Minimum Distribution Guidelines

November 30, 2013

With the year coming to a close, it’s important to make sure you have taken, or are set up to take, your 2013 required minimum distribution. The amount you need to take is based on the total value of all your IRA accounts. If this is the first time that you are required to take an RMD, you may have until April 1, 2014 to do so. Below is a brief guide that will hopefully answer many of your questions about taking required minimum distributions. Alternatively, you can call one of our Wealth Managers at (800) 541-7774 to potentially determine your RMD amount. Click Here to Read the Report [+] Read More