As you look forward to retirement, you may be picturing the easy life. Maybe you plan for the beach, maybe you will pursue a new hobby, charity work or even a new, more fulfilling career. As you are preparing to enter retirement remember that you Social security benefits can potentially be taxed and plan ahead.
If you think of the six-fingered vizier Count Rugen from the movie "Princess Bride" and his egregious tax collection every time the IRS comes to mind, just remember, the IRS does not need to be scary. You do not have to be crafty to get prepared for retirement. The key is to plan ahead!
The short answer is the IRS will probably want their portion. How much can vary based on how much income and the type of income. The IRS offered Publication 915 to help resolve the answer to my question "Are my social security benefits taxable?"1
Inside you will find Worksheet A, which will help determine if your social security benefits are taxable and they provide some great information like these thresholds:
Your base amount is:
$25,000 if you are single, head of household, or qualifying widow(er)
$25,000 if you are married filing separately and lived apart from your spouse for all of 2013
$32,000 if you are married filing jointly
$-0- if you are married filing separately and lived with your spouse at any time during 2013
If like many people your social security income is a part of your retirement planning, remember you may have to pay taxes on your social security benefits. Be sure to plan ahead, especially if you have income from other sources such as taxable interest, saving bonds, rental properties and stock dividends.
If you had a strategy to maximize social security benefits, hopefully you did so with the understanding they can still be taxable, at least in part. Speak with one of our Wealth Managers to aid you in finding your way through the question "Are social security benefits taxable?" Give us a call at (800) 541-7774.
Leslie is a Client Service Specialist at WrapManager, Inc.
Sources
1 IRS.gov
To the extent this presentation includes any state or federal tax advice, the presentation is not intended or written by WrapManager, Inc. to be used, and cannot be used, for the purpose of avoiding federal tax penalties. WrapManager, Inc. does not advise on any income tax requirements or issues. Use of any information presented by WrapManager, Inc. is for general information only and does not represent tax advice either express or implied. You are encouraged to seek professional tax advice for income tax questions and assistance.