Get More From Your Social Security

https://youtu.be/_RFTqJWY6Og

Transcript

00:00:00:09 – 00:00:25:10
Mike
This week, we’re answering the question, how do you reduce taxes on your Social Security? Well, the first thing you need to understand is how is your Social Security taxed? You’ll see on the screen here, I’ve got some numbers. I have single 25,030 4000 and married 32 and 44,000. So what is the significance of those numbers in the tax code?

00:00:25:20 – 00:01:06:27
Mike
Those numbers represent a these two numbers represent a 50% level, and these two numbers represent an 85% level. Now, that does not mean that your Social Security, that half of it, that’s taxed at a rate of 50%. It simply means that if your modified adjusted gross income, that’s a phrase modified adjusted gross income, if it exceeds 50% or exceeds 25,000, if you’re single or 32,000 if you’re married, then up to 50% of your Social Security is included in your overall tax calculation.

00:01:07:13 – 00:01:43:12
Mike
If your modified adjusted gross income, if you’re single, exceeds 34,000, if you’re married, if it exceeds 44 now up to 85% of your Social Security is included when calculating your taxable income. That’s what those mean. But the question is what in the world is modified adjusted gross income? It works like this. It is equal to 50% of your Social Security income.

00:01:43:12 – 00:02:16:22
Mike
So whatever you get gross for Social Security, you take half of that number. Plus, here’s the fun part. Everything else? Oh, I don’t like that one. Everything else. Here’s the deal. What do they mean by everything else? Well, here’s a little bit of a list for you. What they count. Everything else includes any pension you get. It includes any earnings.

00:02:16:22 – 00:02:55:28
Mike
So maybe, you know, who knows? Maybe you’re working part time, right? Guess what? It’s included rental income, business income. ira401k403b distributions. Right. Any any pretax retirement distributions count. That’s a big E, especially when you have required distributions. Oh, things like what if you get interested in dividends that counts. How about this one? Tax free municipal muni bond interest counts.

00:02:56:07 – 00:03:22:15
Mike
That counts in this calculation. Hey, what if you’re getting deferred comp? A deferred comp payout that counts? Basically, everything counts. There’s all counts against you. And so what happens is when you’re into retirement, like, well, heck, you add all that stuff up plus half of your Social Security. Next thing you know, you’re over the 34 or 44,000 single or married limits.

00:03:22:15 – 00:03:52:00
Mike
You’re like, oh my gosh, 85% of my Social Security is counted. There’s nothing I can do about it. Oh, not so fast. Let’s slow down a minute. Here are some places that you can get income that do not count in the calculation. So. Roth anything anything that says. Roth income you get from a Roth IRA, a Roth IRA and a Roth 457 Roth 43b if it says Roth doesn’t count.

00:03:52:18 – 00:04:25:24
Mike
Life insurance, if you get income from life insurance contracts, assuming it’s structured the right way, doesn’t count. Reverse mortgage income. If you have a reverse mortgage and you’re getting income from that doesn’t count return of principal income, like some annuities out there that are non-qualified when you’re taking income, you may have a chunk of that income be considered nontaxable or non-qualified return a principal income doesn’t count.

00:04:26:00 – 00:04:57:27
Mike
This ability income doesn’t count. Now, I’m not going to keep going because they get more and more esoteric. But general rule of thumb is Roth return a principal reverse mortgage, disability, income. Those are the kinds of things that don’t count. Now, whenever you’re trying to reduce your taxes on your Social Security, the game is to try to get some of this stuff in this category above.

00:04:58:21 – 00:05:21:01
Mike
We want to move them down. What? Excuse me to the category below. We want to try to get that move down. But here’s the thing. Some of this stuff on the top section, you really it’s not a lot you can do. But I’m going to highlight and the ones that there’s nothing you can do about it, for example, pension.

00:05:21:11 – 00:05:46:06
Mike
We’re going to put a big X there. If you’re getting a pension, nothing you can do about it. You’re stuck if you’re working. I guess I could say working. As long as you’re working, nothing you can do. But you can always quit your job. I guess. So you could do something about it, I guess. Deferred comp, that’s one that you’re normally kind of set up and it just kind of pays out.

00:05:46:17 – 00:06:15:21
Mike
As long as it pays out, you’re stuck. These are kind of dotted axes, and that means as long as you have that income or need, that income, not a lot you could do about it. But guess what? Pretty much everything else on the list you control these three. These are the big three right here. Those three IRA 41k, you can always do Roth conversions, interest and dividends.

00:06:15:21 – 00:06:37:28
Mike
You can always reinvest that money in a more tax efficient way. Tax free muni bonds. Guess what? Unless you’re in the highest tax bracket, you shouldn’t have them anyway. Those are the big three that cause a lot of the problems with taxes on Social Security. If you can work with a financial advisor who can help you with these three, your IRA income or 41k income, interest and dividends muni bonds.

00:06:38:04 – 00:07:02:10
Mike
If you could work with a financial advisor that truly understands tax planning, guess what? They can help you restructure those so that you can truly get your taxes on your Social Security to a minimum. Bottom line. Bottom line. Remember this do not let the tax tail wagging the investment dog. Don’t do that. And everybody’s different when it comes to taxes.

00:07:02:10 – 00:07:28:10
Mike
I said that to begin with, but for a lot of people and maybe you, there are things you can do to help reduce taxes on your Social Security. Here’s the one really I really want to highlight this pension. That’s the one if you have a really big pension where you just might be stuck pretty much everything else. Something you can do about it.

00:07:28:20 – 00:07:51:20
Mike
But that pension, that’s one long term that that really can handcuff you. Anyway, I hope you found this at least somewhat helpful tax planning. It’s so unique to every person. You really want to sit down with an advisor who is knowledgeable in this space, who can help you kind of plan that out. And if you’re really good, you try it yourself.

00:07:51:20 – 00:08:11:25
Mike
But I always encourage when dealing with taxes, talk to a professional. All right. Hope you enjoyed it. We’ll see you again soon.

 


 

Call Now Button