Tag: social security benefits | McMill CPAs & Advisors

Jared Faltys

Specializes in financial planning, business tax planning, investment advisory services

Before deciding to collect Social Security benefits, consider these tips to help you make an informed decision.

TIMING MATTERS

If you plan to continue working while receiving benefits, there are limits on how much you can earn each year between age 62 and full retirement age and still collect all your benefits However, once you reach full retirement age, your earnings do not affect your benefits, but they may be taxable as income.

And if you don’t need the income now, you may decide to wait beyond full retirement age to receive additional retirement credits. Or you can choose early retirement and invest your benefits elsewhere.

HEALTH INSURANCE

If you stop working, not only will you lose your paycheck, but you may also lose employer-provided health insurance. Although exceptions exist, most people will not be covered by Medicare until they reach age 65.

Your employer should be able to tell you if you will have health insurance benefits after you retire or if you are eligible for temporary continuation of health coverage. If your spouse is employed, you may be able to switch to their company’s health insurance.

ADDITIONAL BENEFITS

If you qualify for benefits as a widow, widower, or surviving divorced spouse, you may choose to apply for survivor’s benefits now and delay your retirement benefit until later.

If you delay receiving your retirement benefit until your full retirement age or later, your retirement benefit will be larger.

EXPECTATIONS

Consider your family history and lifestyle when thinking about your life expectancy. You may need extra money in later years if you come from a family with long life expectancies. This is particularly important as you could potentially outlive your retirement savings, especially any investments with limits on how long they are paid.

Your life expectancy affects your retirement planning decisions. Knowing this helps you determine whether you should start receiving reduced benefits at age 62 or wait until age 70 to receive a higher payment.

source:https://e.clientlinenewsletter.com/mcmillcpasandadvisors

Nancy Brozek

Specializes in construction accounting, business tax planning, investment advisory services

With Social Security benefit payments increasing nearly 9% this year, you may need to rethink your retirement tax planning.

INCOME MATTERS

If you started working part-time to offset some of the recent price inflation, this increase in your Social Security payments might make some or more of it subject to federal income taxes. If you file as an individual and your combined income is between $25,000 and $34,000, up to half of your benefit may be subject to income taxes. Social Security defines combined income as your adjusted gross income, plus nontaxable interest, plus one-half of your Social Security benefit.

CONSIDER A REDUCTION

With the possibility of being in a higher tax bracket this year, due to increased Social Security benefits, consider cutting back on withdrawals from your qualified retirement plans. If you can avoid taking more than your required minimum distribution (RMD) in 2023, you might be able to limit your tax liability.

If you need more than your RMD, consider pulling funds from a taxable brokerage account where you’ll pay the lower long-term capital gains rates if you held investments for more than a year.

Also consider qualified withdrawals from a Roth IRA, a Roth 401(k), or a health savings account (HSA), which would not be subject to federal income tax and wouldn’t have an impact on how your Social Security benefit is taxed.

This year’s cost of living adjustment can help you keep up with higher prices. And in the short run, managing your withdrawals may help you smooth out the tax bumps during a period of high inflation.

Figuring out withdrawals from retirement and brokerage accounts can be complicated, so it may help to work with an advisor. But even if you do it yourself, try to withdraw from your Roth and HSA accounts last, allowing those assets to grow tax-free longer. Withdrawals from all three types of accounts in the same year can help manage combined taxable income.

source: https://e.clientlinenewsletter.com/mcmillcpasandadvisors