Category

Social Security

Jul 26
0

Personal Finance: The Importance of Starting Early

By | Financial Planning, Retirement, Social Security, Tax Planning

Whether you’re just starting out in your career, you are a Gen-X-er sandwiched between your kids’ college expenses and aging parents’ needs, or you are a Baby Boomer eyeing retirement, starting early can help when it comes to your finances. Here are some reasons why.

When You’re Young—In Your 20s

We’ve all heard the famous quote by Albert Einstein, the one where he said, “Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.” And it’s true. In many cases, if you start out early—perhaps in your teens or 20s—saving just a small amount each month, you can amass more money through time than if you start saving at a later age, even if you save a larger amount each month. Of course, it depends on what you invest in. Be sure to check with a trusted financial advisor about how this works.

Investopedia uses this example:

Let’s say you start investing in the market at $100 a month, and you average a positive return of 1% a month or 12% a year, compounded monthly over 40 years. Your friend, who is the same age, doesn’t begin investing until 30 years later, and invests $1,000 a month for 10 years, also averaging 1% a month or 12% a year, compounded monthly.

Who will have more money saved up in the end? Your friend will have saved up around $230,000. Your retirement account will be a little over $1.17 million. Even though your friend was investing over 10 times as much as you toward the end, the power of compound interest makes your portfolio significantly bigger.

When You’re Older—In Your 40s, 50s or Early 60s

As you head into retirement, starting early to map and plan out your retirement—well before you retire—can help you for many reasons, because there are a lot of moving pieces to consider. Plus, everyone’s situation is completely different and what might work for someone else might not be right for you at all. For instance, one person’s desired retirement lifestyle could be drastically different than another person’s, requiring different budget amounts. (Consider whether you want to stay home and become a painter, or travel the world with your entire extended family. That’s what we mean by drastically different budgets.)

Once you have your required retirement budget amount settled, timing then becomes very important. A financial advisor with a special focus on retirement can really make the difference by laying out a retirement roadmap just for you. Here are some of the things you should know and think about:

1) Medicare Filing – Age 65

You are required to file for Medicare health insurance by age 65 or pay a penalty for life. To avoid this penalty, be sure to sign up for Medicare within the period three months before and three months after the month you turn age 65. If you are still working or otherwise qualify for a special enrollment period, you can sign up for Part A which is free for most people, and then sign up for Part B after you retire. Visit https://www.medicare.gov/basics/costs/medicare-costs/avoid-penalties to learn more about penalties and how you can avoid them.

You are required to have Medicare coverage if you are not working or covered by a spouse with a qualified health insurance plan, and Medicare (other than Part A) is not free. In fact, it costs more if your income is higher. Your Medicare premium is often deducted right out of your Social Security check, and premiums generally go up every year.

When you sign up for original Medicare Part B or a replacement Medicare Advantage plan, the least amount you will pay for 2024 is $174.70 per month per person. For those with higher incomes, the Medicare premiums you pay are based on your income from two years prior—those with higher incomes pay more. For couples filing jointly, the highest amount you might pay for Part B coverage if your MAGI (modified adjusted gross income) is greater than or equal to $750,000 is $594.00 per month per person for 2024.

So, depending on your income for the tax year two years prior to filing for Medicare, your premium could be from $174.70 to $594.00 in 2024, or somewhere in between.

If you plan ahead, your advisor might help you plan to take a smaller income in the years prior to turning age 65 in order to keep your Medicare premium smaller. For instance, some people might want to retire at age 62 or 63 and live on taxable income withdrawn from their traditional 401(k) or IRA account/s before they even file for Medicare or Social Security. Each person’s situation is completely unique, but advance retirement planning may help you come out ahead in the long run.

2) Social Security Filing – Age 62, 66-67, 70 or sometime in between

Another moving piece in the retirement puzzle is Social Security. The youngest age you can file for Social Security is age 62, but a mistake some people can make is thinking that their benefit will automatically go up later when they reach their full retirement age—between age 66 to 67 depending on their month and year of birth. This is not the case. If you file early, that’s your permanently reduced benefit amount, other than small annual COLAs (cost of living adjustments) you might or might not receive based on that year’s inflation numbers.

Filing early at age 62 can reduce your benefit by as much as 30% according to Fidelity. Conversely, waiting from your full retirement age up to age 70 can garner you an extra 8% per year. (At age 70, there are no more benefit increases.)

Planning ahead for when and how you will file for Social Security can make a big difference in the total amount of benefits you receive over your lifetime. And married couples, widows or widowers, and divorced single people who were married for at least 10 years in the past have even more options and ways to file that should be considered to optimize their retirement income.

3) Taxes In Retirement

Thinking that your taxes will automatically be lower during retirement may not prove true in your case, and it’s important to find out early if there is a way to mitigate taxes through early planning. Don’t forget that all that money you have saved up in your traditional 401(k) will be subject to income taxes—and even your Social Security benefit can be taxed up to 85% based on your annual combined or provisional income calculation.

And the IRS requires withdrawals. Remember that by law RMDs (required minimum distributions) must be taken every year beginning at age 73* and strict rules apply. You must withdraw money from the right accounts in the right amounts by the deadlines or pay a penalty in addition to the income tax you will owe on the mandated distributions.

Planning ahead to do a series of Roth conversions—shifting money in taxable accounts to tax-free* Roth accounts—might be indicated to help lower taxes for the long-term in your case, but these must be planned carefully and are not reversible.

 

*There is a unique rule since 2022. If you reach age 72 after December 31, 2022, you must begin receiving required minimum distributions by April 1 of the year following the year you reach the age 73.

This means that RMDs (required minimum distributions) must be taken by midnight April 1st of the year following the year you reach the age 73, and then by midnight December 31st of every year after the year you reach age 73.

This creates an opportunity for someone who turns 73 to delay their first RMD until the following year (by April 1) and then take their 2nd RMD that same year by December 31st. So, two RMDs in one year if desired. Then one RMD forever afterwards.

 

Let’s talk about your financial and retirement goals and create a plan to help you achieve them. Don’t put it off—give us a call! You can reach Bulwark Capital Management in Tacoma, Washington at 253.509.0395. 

*In order for Roth accounts to be tax-free, all conditions must be met, including owning the account for at least five years.

This article is for general information only and should not be considered as financial, tax or legal advice. It is strongly recommended that you seek out the advice of a financial professional, tax professional and/or legal professional before making any financial or retirement decisions.

Sources:

https://www.investopedia.com/articles/personal-finance/040315/why-save-retirement-your-20s.asp

https://www.medicare.gov/basics/costs/medicare-costs/avoid-penalties

https://www.cms.gov/newsroom/fact-sheets/2024-medicare-parts-b-premiums-and-deductibles

https://www.ssa.gov/benefits/retirement/planner/agereduction.html

https://www.fidelity.com/viewpoints/retirement/social-security-at-62

https://content.schwab.com/web/retail/public/book/excerpt-single-4.html

https://www-origin.ssa.gov/benefits/retirement/planner/taxes.html

https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs

 

Trek 24-291

Aug 12
1

What is COLA, and How Does it Affect Retirement?

By | Retirement, Social Security

The COLA on Social Security is projected to increase benefits by more than 10%. How does that affect your retirement?

Inflation in the United States is at a 40-year high, and the entire country seems to be feeling the squeeze of rising prices, regardless of income level. Though the debate over the cause of current inflation rates rages on, one thing seems to be certain: the cost of everyday goods, like rent, gas and food, continues to rise [1].

Understandably, that leaves American consumers with questions and concerns. First, as the value of the dollar decreases, which lifestyle adjustments can be made to compensate for the loss in buying power? Second, won’t somebody do something?

This year, the Federal Reserve has taken action by raising interest rates several times in an effort to curb spending and cut demand, ideally forcing the price of goods down, or at the very least, leading them to stagnate [2]. But lately, the Fed has been criticized by experts worried that their actions may not be having the desired effect, but instead may be bringing on a recession [3].

So, what other actions does the government take to protect people from inflation? For retirees and those collecting Social Security benefits, the Social Security Administration began implementing an annual COLA almost five decades ago.

What is a COLA?

No, it’s not the tasty drink you order when you first sit down at a restaurant. COLA stands for “cost-of-living adjustment” and was first introduced by the Social Security Administration in 1975 in an effort to counter inflation for beneficiaries relying on those funds [4]. Beneficiaries of Social Security, which include individuals who have reached the age of 62 or have qualifying disabilities, can receive an increase in their benefit based on the Department of Labor’s Consumer Price Index for Urban Wage Earners and Clerical Workers, or the CPI-W.

For example, at the beginning of this year, Social Security beneficiaries may have noticed their checks increasing by 5.9%. That increase didn’t happen by chance or because of a missed decimal point in the accounting department. It was a carefully constructed adjustment based on 2021’s inflation rate, ideally giving those living on fixed income a chance against rising costs.

And next year’s COLA for 2023 could be the highest we’ve seen since 1981.

How does this affect retirees?

Retiring isn’t easy, and there’s a reason workers open IRAs and employer-sponsored retirement accounts, like 401(k)s, early in their careers to begin building for the future. Retirement comes with a great deal of financial risk, and one of the biggest contributors to that risk is inflation.

Retirees often live on fixed incomes, withdrawing money from savings accounts, retirement accounts, pensions, annuities, investments and Social Security to cover their living expenses. Though a proper financial plan accounts for inflation, it can be difficult to foresee spikes like the one in 2022, potentially upsetting expectations of how long your money will last. Though imperfect, the COLA can offer retirees increases to one of their main sources of income in retirement, hopefully offsetting change that can occur over the course of decades.

What is the next COLA expected to be, and when can I expect it?

A recent COLA projection made headlines with an eye-popping number. The Senior Citizens League estimates that Social Security beneficiaries could see a 10.5% COLA, meaning that the average monthly benefit could increase by about $175[5].

That estimate has steadily climbed over the past few months, though it’s certainly not yet set in stone. The Social Security Administration will announce the next COLA in October, and it will go into effect in January of 2023.

Are there any problems with COLA?

Though an increase in your Social Security check might sound entirely positive, there are drawbacks to COLA and the problems it aims to correct. The COLA is intended to cover the difference between the current cost of living and the previous year’s cost of living, but it is possible that the extra money in your benefit will only partly cover your increased living expenses.

The COLA is not directly aligned with inflation, so it is possible for inflation to rise faster than Social Security’s adjustment. For example, in 2021, inflation climbed 7% [6] while the COLA only increased by 5.9% [7]. Similarly, the Social Security COLA can remain unchanged year over year, just as it did following 2009, 2010 and 2015 when inflation rose 2.7%, 1.5% and 0.7%, respectively [8].

While not completely reflective of each other, the COLA and inflation do correlate, and inflation is currently outpacing wages. In fact, in 2021, wages actually saw a 3.5% drop when living costs are accounted for [9]. Though this doesn’t directly affect Social Security beneficiaries, the Social Security trust funds are built by contributions from income taxes [10]. It stands to reason that inflation’s outpacing of wages would mean that the Social Security trust funds, which currently project to only be able to pay at their current rate until 2035, would deplete even quicker [11].

So, as someone who collects Social Security or hopes to in the future, what can I do?

First and foremost, we would always recommend speaking with your financial professional to assemble a proper plan for your retirement. The right financial plan can be the difference between having adequate funds for your desired lifestyle or running out of money. Social Security is only one income stream, and backup plans with alternative sources of funds are vital.

If you have any questions about your Social Security benefit, please give us a call! You can reach Bulwark Capital Management at 253.509.0395.

Sources:

  1. https://www.marketwatch.com/story/coming-up-consumer-price-index-for-may-11654862886
  2. https://www.forbes.com/advisor/investing/another-75-point-fed-rate-increase/
  3. https://www.forbes.com/sites/jonathanponciano/2022/07/27/fed-raises-interest-rates-by-75-basis-points-again-as-investors-brace-for-recession/
  4. https://www.ssa.gov/oact/cola/colasummary.html
  5. https://www.cnbc.com/2022/07/13/social-security-cost-of-living-adjustment-could-be-10point5percent-in-2023.html
  6. https://www.cnbc.com/2022/01/12/cpi-december-2021-.html
  7. https://www.ssa.gov/oact/cola/colaseries.html
  8. https://www.thebalance.com/u-s-inflation-rate-history-by-year-and-forecast-3306093
  9. https://www.cnn.com/2022/07/29/economy/worker-wages-inflation/index.html
  10. https://www.ssa.gov/news/press/factsheets/WhatAreTheTrust.htm
  11. https://www.thestreet.com/investing/social-security-2035

 

Investment Advisory Services offered through Trek Financial LLC., an (SEC) Registered Investment Advisor.

Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed, and past performance is no guarantee of future results. For specific tax advice on any strategy, consult with a qualified tax professional before implementing any strategy discussed herein. Trek 348

Nov 30
0

The Latest Facts About Social Security

By | Retirement, Social Security

On October 13, 2021, the Social Security Administration (SSA) officially announced that Social Security recipients will receive a 5.9 percent cost-of-living adjustment (COLA) for 2022, the largest increase in four decades. This adjustment will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2022. Additionally, increased payments to more than 8 million Supplemental Security Income (SSI) beneficiaries will begin on December 31, 2021.

 

Biggest COLA Increase in Decades?

While many predicted a bump of as much as 6.1% given recent movement in the Consumer Price Index (CPI), the announced 5.9% increase is still substantial. Some fear that rising consumer prices may dilute the impact of the increase with inflation currently running at more than 5 percent. While this remains to be seen, Social Security beneficiaries will no doubt welcome the largest adjustment since 1982.

 

How You Will Be Notified.

According to the Social Security Administration, Social Security and SSI beneficiaries are usually notified about their new benefit amount by mail starting in early December. However, if you’ve set up your SSA online account, you will also be able to view your COLA notice online through your “My Social Security” account.

 

Is it Enough?

For years organizations like the AARP have pointed out that the index used to calculate inflation—the CPI-W, a consumer price index that reflects the increasing cost of goods for urban wage earners—does not reflect the inflation on goods and services needed by the elderly, such as health care. In July, a bill titled “Fair COLA for Seniors Act of 2021” was introduced which would require the Consumer Price Index for the Elderly (CPI-E) be used when Social Security calculates their annual COLA (Cost of Living Adjustment).

 

Is Social Security Going Broke?

Per the Washington Post, each year, the Social Security Board of Trustees releases a report that analyzes the current and projected financial health of Social Security and Medicare. This year, the trustees found that: “The finances of both programs have been significantly affected by the pandemic and the recession of 2020.”

The trustees now project the Old-Age and Survivors Insurance (OASI) Trust Fund will be insolvent in 2033. What this means there will be enough income to pay out only 76 percent of scheduled payments.

One solution often debated is getting rid of the income threshold for the Social Security payroll tax. In 2021, the maximum taxable earnings subject to the Social Security tax is $142,800. Earnings above the maximum are not subject to the tax, which is 6.2 percent for employees and a matching 6.2 percent for employers. (NOTE: Even though many do not pay in, very few high-earners decline to file for Social Security payments.)

There’s no income cap for the Medicare tax, which is 2.9 percent. (Employers pay 1.45 percent, and employees cover the other half.)

A Gallup poll this year found that 38 percent of U.S. adults not yet retired thought Social Security would be a major source of their income, but the reality is that 57 percent of retirees rely on Social Security as their main source of income.

 

Your Next Steps?

If this information about Social Security surprises or concerns you, it’s always a good idea to seek guidance from your financial professional about changes to any of your sources of retirement income. We welcome the chance to talk with you about this. You can reach Bulwark Capital Management at 253.509.0395.

 

 

Sources:

https://www.ssa.gov/cola/#:~

https://www.cbsnews.com/news/social-security-benefits-cola-cost-of-living-2022-increase/

https://www.forbes.com/sites/davidrae/2021/07/21/will-congress-change-social-security-cost-of-living-adjustment-is-calculated/?sh=21dd13ca373c

https://www.washingtonpost.com/business/2021/09/03/social-security-insolvency/

https://www.latimes.com/business/story/2019-12-03/social-security-wealthy-benefits

 

 

 

Feb 17
2

Zach Abraham Featured on Fox News

By | Geopolitical Affairs, In The Headlines, On TV, Social Security

Zach Abraham, Chief Investment Officer and founder of Bulwark Capital Management, recently appeared on Fox News to discuss the recent stock market furor over Reddit retail investors.

Here is a brief summary of some of Zach Abraham’s comments:

Hedge funds have been making money for 20 years by betting on potential stock market losses. Now retail investors—like the recent Reddit investors in GameStop—have the same capability.

Zach encouraged Schwab, TD Ameritrade and the SEC to step away and let the market work itself out. “It will build more faith in the markets,” he said.

 

Watch the segment—Zach starts at 1:53 minutes:

https://www.fox5dc.com/video/894564.amp

Jun 26
0

Women and Social Security: Do you really know your benefits?

By | Social Security

Social Security guidelines for retirement benefits were established all the way back in the 1930’s and were founded on a traditional family situation1. With marriage patterns and caregiving needs constantly evolving, the modern woman could be at a disadvantage if strategic retirement planning is not properly implemented. While Social Security is gender-neutral and individuals with identical earnings histories are treated equally in terms of benefits, the reality of the matter is that women face greater economic challenges than men do when it comes to retirement for a number of reasons2.

For example, women tend to live longer than men, but have lower lifetime earnings. Because of this, women have a strong likelihood of reaching retirement with significantly smaller pensions and/or assets than their male counterparts3. Because nearly 55 percent of Social Security beneficiaries today are women, it is important to know the details of your benefits that you may not be aware of.

 

Caregiving and Strategizing

Losing one paycheck is a concern due to women outliving men. Women also have a higher probability of being single and dependent on only one income. Furthermore, women have a tendency to care for multiple people at a time: parents, spouses, and children, etc., and leave the workforce to care for these loved ones. Taking a break from the workforce to care for loved ones may result in less wealth accumulation and a smaller Social Security benefit. Being single with just one income while possibly taking care of multiple different people at a given time is one of the reasons why it is so important for women, the likely caregivers, to strategize their retirement income. Marriage typically helps Social Security beneficiaries, and knowing that you can take a former spouse’s Social Security benefit could be a major advantage depending on your specific situation.

 

The Facts You Should Know

If you are married or have ever been married, you have options when it comes to your Social Security benefit…options that no one may have told you about. Did you know that divorced women may be able to receive benefits on an ex-spouse? Even if they have remarried! Married women also have the option of claiming benefits on either their work record or 50% their spouse’s benefit6. Women who have been widowed are also eligible to receive a survivor’s benefit. Here are the cold, hard facts:

 

Married Women

  • Married women are eligible to claim half of their spouse’s Social Security benefit instead of their own. This option may be beneficial for couples with large earnings differences. To be qualified, you have to be at least 62 years of age (dependent on your birth year) in order to start receiving your benefit.

 

Divorced Women

  • If divorced, you may be eligible to claim benefits on a former spouse’s record, even if your ex-spouse is remarried. If your marriage lasted 10 or more years, you are currently unmarried, and you are 62 years or older, you are certainly qualified to receive Social Security benefits. Your ex must also be at least 62 years old, and your benefit has no effect on the benefit amount of your spouse.

 

  • And possibly the most important part of all: your ex-spouse never has to know. The Social Security Administration will not notify your ex if you are receiving his benefit7. And even if your ex-spouse is deceased, you still have the option of receiving his benefit. Which leads to the next point…

Widowed Women

  • If widowed, you are eligible to receive your late spouse’s Social Security payment in the form of a survivor benefit, provided that it is a greater amount than your own benefit. (Why would you take your late spouse’s benefit if it is less than your own?) You must be at least 60 years of age—if widowed, you are not required to wait until age 62. If you are disabled, you can receive this benefit at the age of 50.

 

  • Know that if you remarry before the age in which you are eligible to receive your late spouse’s benefit, you will be unable to receive their benefit. If you remarry after you start receiving your deceased spouse’s benefit, you can still continue to receive benefit (but if your new spouse is a Social Security recipient and his benefit is larger than your late spouse’s, you may consider applying for your current spouse’s benefit instead). You cannot receive both benefits, you will have to choose one or the other.

 

Knowledge is power, and the more you know about your Social Security options, the greater you will benefit from your benefit.

We can help, contact Bulwark Capital Management at 253.509.0395  or invest@bulwarkcapitalmgmt.com. 

 

Sources:
1 https://www.cnbc.com/2019/01/18/why-the-stakes-are-higher-for-women-when-claiming-social-security.html
2 https://www.ssa.gov/news/press/factsheets/women-alt.pdf
3 https://www.ssa.gov/pubs/EN-05-10127.pdf
4 https://www.investopedia.com/ask/answers/102814/what-maximum-i-can-receive-my-social-security-retirement-benefit.asp
5https://www.nasi.org/learn/socialsecurity/overview
6https://www.fidelity.com/viewpoints/retirement/social-security-and-women
7https://www.wiserwomen.org/index.php%3Fid%3D219%26page%3DSocial_Security_and_Divorce:_What_You_Need_to_Know

 

Apr 24
0
Social Security Taxation

Are your Social Security benefits taxable?

By | Retirement, Social Security, Tax Planning

The answer is: Yes, sometimes.

If you don’t have significant income in retirement besides Social Security benefits, then you probably won’t owe taxes on your benefits. But if you have large amounts saved up in tax-deferred vehicles like 401(k)s, you could be in for a surprise later.

AGI (Adjusted Gross Income) versus Combined Income.

You are probably familiar with what AGI, or adjusted gross income, means. To find it, you take your gross income from wages, self-employed earnings, interest, dividends, required minimum distributions from qualified retirement accounts and other taxable income, like unearned income, that must be reported on tax returns.

(Unearned, taxable income can include canceled debts, alimony payments, child support, government benefits such as unemployment benefits and disability payments, strike benefits, lottery payments, and earnings generated from appreciated assets that have been sold or capitalized during the year.)

From your gross income amount, you make adjustments, subtracting amounts such as qualified student loan interest paid, charitable contributions, or any other allowable deduction. That leaves you with your adjusted gross income, which is used to determine limitations on a number of tax issues, including Social Security.

Combined Income is a formula used after you file for your Social Security benefits.

Whether or not your Social Security benefits are taxable depends on your combined income each year, which is defined as your adjusted gross income (AGI) plus your tax-exempt interest income (like municipal bonds) plus one-half of your Social Security benefits.

The IRS provides a worksheet for this. (See the worksheet here: https://www.irs.gov/pub/irs-pdf/p915.pdf#page=16)

If your combined income exceeds the limit, then up to 85% of your benefit may be taxable. But in accordance with Internal Revenue Service (IRS) rules, you won’t pay federal income tax on any more than 85% of your Social Security benefits.

What are the combined income limits?

Social Security benefits are only taxable when your overall combined income exceeds $25,000 for single filers or $32,000 for couples filing joint tax returns.

If you file a federal tax return as an “individual” and your combined income is:

  • Between $25,000 and $34,000 – you may have to pay income tax on up to 50% of your benefits.
  • More than $34,000 – up to 85% of your benefits may be taxable.

If you file a “joint” return, and you and your spouse have a combined income that is:

  • Between $32,000 and $44,000 – you may have to pay income tax on up to 50% of your benefits.
  • More than $44,000 – up to 85% of your benefits may be taxable.

RMDs (Required Minimum Distributions) can be an unwelcome surprise.

Starting at age 70-1/2, you are required to start taking money out of your tax-deferred accounts, whether you need the income or not. These accounts include:

  • Traditional IRAs
  • SEP IRAs
  • SIMPLE IRAs
  • Rollover IRAs
  • Most 401(k) and 403(b) plans
  • Most small business retirement accounts

There are precise formulas for calculating how much you have to withdraw each year based on the IRS Uniform Lifetime Table. If you miscalculate, or if you or your plan administrator fail to move the money by December 31, you could face a 50% tax penalty; there is no grace period to April 15.

NOTE: The table goes up to age 115 and beyond. You can find the IRS life expectancy table as well as an IRS worksheet for calculating RMDs here: https://www.irs.gov/pub/irs-tege/uniform_rmd_wksht.pdf

Simplified RMD example for illustrative purposes only:*

Let’s say you are single, age 72, and you have one qualified account—$400,000 was the value of your 401(k) plan as of December 31 last year. You divide $400,000 by your life expectancy factor of 25.6 which give you $15,625.

This is the amount that you have to take out of your 401(k), which will count as part of your AGI.

Simplified Combined Income example for illustrative purposes only:*

To continue with our simplified example, let’s say you, our 72-year-old single person above, receives $2,800 per month in Social Security ($33,600 per year) and you don’t have any other source of income besides the RMD taken from your 401(k) account as illustrated above.

Based on the combined income formula:

AGI = $15,625

+ Non-taxable interest = $0

+ Half of Social Security = $16,800

__________________________________________

Your total combined income is = $32,425   

Because you are over the combined income limit of $25,000 for an individual, but less than the $34,000 which would require 85%, you would pay taxes on 50% of your Social Security benefit.

###

At Bulwark Capital Management, we provide retirement planning and Social Security benefit optimization, and we work in conjunction with your CPA or tax professional to help you consider taxes and how to minimize them as part of your overall retirement plan. Call us at
253.509.0395.

* This material is not intended to be used, nor can it be used by any taxpayer, for the purpose of avoiding U.S. federal, state or local taxes or penalties. The information in this article is provided for general education purposes only. Do not rely on this information for tax advice. Check with your CPA, attorney or qualified tax advisor for precise information about your specific situation.

Sources:

https://www.investopedia.com/ask/answers/013015/how-can-i-avoid-paying-taxes-my-social-security-income.asp

https://www.investopedia.com/terms/t/taxableincome.asp

https://smartasset.com/retirement/how-to-calculate-rmd

https://www.irs.gov/pub/irs-tege/uniform_rmd_wksht.pdf