For many retirees, the taxable income generated by their Social Security benefits is a shock. Now they are wondering how to reduce taxes on Social Security.
Although they were aware that some of their benefits would be taxable, they were not aware of the complexity in determining the percentage that would be taxable.
Thankfully, there are a few moves that can reduce taxes on Social Security.
Wondering how much income you’ll get from Social Security when you retire? You might be surprised to discover that the average retiree receives one-third of their total income from Social Security, according to the Social Security Administration.
In other words, 33% of retirement income comes from Social Security, and the remaining 67% comes from other sources, like pensions and retirement savings.
While 33% is a significant amount, the statistic includes people who depend on Social Security for 100% of their retirement income and people who have so much money that they don’t notice the monthly Social Security deposits.
The often quoted 33% might be an arithmetic average, but one thing is sure — it isn’t the norm for most people.
The recalculation of Social Security benefits is not unusual. There are a variety of circumstances which can trigger a recalculation so it’s important to know when and how your benefit can change if this happens to you.
Before we get too far, let’s clear up some of the terminology. There are actually two terms that sound a lot alike, but they have different meanings. After all, we are dealing with Social Security rules here and terms that we use synonymously in everyday language don’t always have the same meaning with the SSA.
These two terms are recalculation and recomputation.
The Social Security 2100 Act has been reintroduced after undergoing a few structural changes in an effort to make it more acceptable to both Democrats and Republicans. If you want to keep up with the changes to Social Security, watch this carefully as could be the bill that is passed as the opening round in the fight to preserve the Social Security system.
The goal of the Social Security 2100 Act is not to be a permanent fix for Social Security. Although you probably won’t hear about this in the soundbites on the news, of the 14 things that could change in this bill, 12 of these changes will sunset in 2027.
This proposal as its written now will include a fairly broad set of changes, and not all of these changes are going to affect everyone. There are some changes that are specific to public servants, changes specific to disability benefits, changes to how benefits are paid to survivors, and a few other nuanced changes that only affect specific groups, but there are also some broad changes that most everyone will feel.
Let’s cover each of these changes individually.
If you’ve had to buy anything lately, you’ve probably noticed that just about everything is more expensive now than it was this time last year. It’s not just you — inflation has caused prices to rise across the board. But it’s about more than the costs of goods and services.
Inflation has a way of extending beyond the price tag, including impacting the overall health of the system and the individuals who receive benefits.
You’ve probably heard that Social Security is going broke. Given that, it’s logical to ask, “Why can’t the government just print more money to fix this problem?”
That might sound like the simple and obvious solution. But there are good reasons why printing money to fix this problem isn’t the outcome that any of us want. Doing so could lead to some serious unintended consequences.
The Social Security cost of living adjustment is seemingly straightforward. But, like most provisions within Social Security, nuances within the system can cause confusion. A great example of this is how the rules about the Social Security cost of living adjustment affects spousal benefits.
To understand this calculation, and how to do it properly, requires a broad understanding on how the spousal benefit is calculated.
Financial advisors need to maintain knowledge and expertise about a wide range of planning topics. Most of them tackle this challenge well, and are able to speak on a number of different areas of finance and investing that matter most to their clients.
But one area that often gets neglected: Social Security.
If you’re a financial advisor or any other professional who works with individuals on some aspect of their financial life, I want to give you 3 reasons you need to seriously consider becoming the go-to expert on Social Security. Doing so will not only deepen your relationship with your current clients, but also equips you to achieve explosive growth in your practice.
Many of the nation’s successful small businesses are owned and operated by married couples. When these businesses first start, the goal is simply to try and survive to the next day, the next week, the next month.
Often, very little thought is given to the long-term effect of how self-employment income (abbreviated for our purposes here as SEI) is allocated for future Social Security benefits.
But under the right circumstances, planning in this area can make a big difference!
If you are reading this and are thinking, “I wish I would have known this sooner!” don’t despair. In the right circumstances, there may be an opportunity to retroactively amend the split of SEI for couples in this situation. We’ll cover more on that later.
For now, let’s start by understanding what couples who run a business together need to understand about how their pay structure could impact their future Social Security benefits.
The Social Security monthly benefits statement that most people are familiar with has been around since 1999. That means we’ve been looking at the same Social Security statements for the last 22 years… and it’s high time the Social Security Administration gave their paperwork a modern makeover.
They did just that recently, and I want to walk you through what to expect when you see this new format come to you in the near future. While some people began receiving the new Social Security statements in May, the rollout is still in progress – so don’t be surprised if your statement still looks the same as it always has.
Once you do get your hands on the newest version, you may notice there are a few elements that you’re probably used to seeing that will no longer be included. Meanwhile, other aspects of the statements are brand-new and you want to make sure you fully understand those.