Brian Livesay, The “Retirement Guardian” In San Diego | Social Security Benefits And Taxation

Brian Livesay, the “Retirement Guardian” in San Diego says, “One often over looked area of retirement planning is taxation of Social Security income.”

One of the most critical things to understand is the taxability of social security benefits. People often think social security benefits are nontaxable. This is the case if a person’s combined income which is calculated by adding nontaxable interest and half your social security benefits to your adjusted gross income is below certain limits. For a person filing a return as a single individual combined income between $25,000 and $34,000 will make 50% of the social security benefits taxable and combined income of more than $34,000 causes 85% of social security benefits received to become taxable. For married filing jointly, combined income of $32,000 to $44,000 causes 50% of social security benefits to become taxable and combined income above $44,000 causes 85% of social security benefits to become taxable.

Having your social security benefits become taxable reduces the effects of the standard deduction or itemized deductions and personal exemptions in helping reduce your taxable income. Including half the social security benefits received can easily equal the standard deduction and personal exemption amounts. In effect this is like disallowing these critical deductions and makes every dollar received other than the portion of social security benefits that equaled these deductions taxable. Having 85% of the social security benefits taxable ensures an even greater amount of income is taxable.

Knowing how retirement income will be taxed is critical to a long and comfortable retirement. Early planning can help avoid the effects of having social security benefits taxed at retirement. Diversifying the types of retirement accounts is critical. Too much money in qualified retirement accounts such as 401ks and traditional IRAs in which contributions are not initially taxed but count as earned income when money is withdrawn from these accounts at retirement is often the cause of combined income causing social security benefits to become taxable. If planned correctly these qualified accounts could not be taxed at all if amounts withdrawn at retirement are below the amount that will cause combined income to make social security benefits become taxable.

See more about Brian Livesay on his Who Is Page in the San Diego Professional Journal

You may contact him at his office:
Livesay Capital Solutions Inc.
1761 Hotel Circle S. Ste 360
San Diego, CA 92108
Or, call (866) 726-0725 / (619) 281-8377