If there was a way to lower your taxes on your social security income.
Would you want to know?
If there were ways to reduce the taxes on your overall retirement income wouldn't
you want to know about that as well?
On this video, I'm going to share with you five strategies that could help
you potentially reduce those taxes and increase your retirement income.
But before we get to that, subscribe to our channel and hit the notification bell.
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Now you may have heard the saying he who dies with the most toys wins.
Right?
I'll give you another one.
He or she, who has the most income in retirement will, truly enjoy the
journey, but there's a caveat here.
I don't want you to let the tax tail wag the dog.
In other words, Don't go in zealous pursuit of lowering your taxes if it
compromises the way that you're going to live your life or where you're going
to live, it, it is important to lower the taxes, but more importantly, it's
important to have as much income as possible in this next chapter of life.
Planning is really the key here.
And I think our industry has done a lousy job of showing you, educating you what
you need to do in advance of retirement, in advance of making that social security
choice so that you put yourself in a position to truly enjoy the journey.
And the number five tip that I'm going to give to you today may be the most
important, so hold on till we get to the end so I can share with you that tip.
Now everybody's circumstances different.
Some may be earning so much money that there really isn't going to
be any way to reduce the impact of taxes on their social security.
Some may be just at that threshold or just at that limit where these tips
could make a significant impact for them.
So it's going to be important for you to go to your financial advisor.
Or tax advisor and get their guidance on what you should be doing.
And I do want to share with you, and we do have our new book, don't
outlive your money in retirement, and the second chapter is devoted
exclusively to social security.
So if you want a free chapter, that second chapter on social security,
just click on the link below and I'll get it to you for free.
So I want to start with understanding the difference between
state taxes and federal taxes.
Did you know that there are 38 states that do not tax social
security on the state level?
So as a bonus strategy, if you will, you could move to one of these states
to lower the taxes or reduce or eliminate completely the taxes on
social security at the state level.
But again, that's right, don't let the tax tail wag the top dog.
You don't want to upend your living arrangements here just to
save some money on taxes on your social security income, which you
need to know that it is available.
From a federal perspective I want to differentiate traditional
income from provisional income.
Traditional income is defined as if you will.
Your gross income, your pensions, your social security comes into play.
Um, your earned income.
If you're still working capital gains, any taxable dividends, this
is all wrapped up to win a lot more in the traditional income.
But what I want to focus on for a moment is what we call provisional income and
the thresholds relative to how much in the way of taxes you will be paid.
So let me go to my screen for just a moment, as you can see here on the
bottom of this chart, provisional income is your adjusted gross income,
plus one half of your social security benefit, plus any tax exempt interest.
Typically that means municipal bond income.
And if your provisional income is for your married file jointly under
$32,000, then the amount of your social security that is subject to tax is zero.
If on the other hand, the provisional income is over $44,000.
Then upwards of 85% of your social security will be subject to tax.
If you're single those numbers change a little bit.
If you're under $25,000, your provisional, your, your amount of your
social security subject to tax is zero.
And if you're over $34,000 for your provisional income, then upwards of 85%
of that social security could be taxed.
So, as I said earlier, for some of you, you may just blow through the $44,000
numbers, married, filing jointly.
Cause you just make a lot more money than that.
And you know, it is what it is for those houses.
Who are at or near those thresholds.
And you really need to take a look at some of these strategies to help you reduce
the potential tax on social security.
Whereas for others, I'm going to give you some suggestions in
terms of how to reduce tax on your traditional income and potentially
increase your retirement income.
So strategy number one, just wait longer, push out your claiming strategy to age 70.
If your full retirement age is 67, let's say move it out to seventy.
And for everyone, the, the decision is going to be very specific to you.
What is your circumstance?
What's your financial situation?
How much in the way of assets do you have?
I'm not suggesting that everyone move it to age 70, but what I am suggesting is
if you have an option, Don't necessarily take it at 62 where almost 40% of the
people do when they're first eligible for retirement, cause that could
impact your, your taxes significantly.
Particularly if you're working, if you're working before full retirement age and
you're getting social security benefits, not only can your social security benefits
be taxed, they can also be withheld.
So if you wait, and the difference between waiting between 62 and 70
could be as much as 77% increase.
In your benefit from the age of 62 versus waiting to age 70.
Plus if you're not taking it from 62 to 65 to 68, whatever, you're
not paying taxes on that income, you're going to hold onto more of it.
So again, take a look at this and ask your financial advisor and your
tax advisor what is going to be the best way for you to approach this,
which is the best time to claim.
Strategy number two is utilizing a Roth IRA, and this takes advanced planning.
And this is where again, I think our industry has done a lousy job.
Because if you had planned long enough in advance and funded your Roth IRA or Roth
401k, then the money that will be coming out of that Roth comes out tax free.
It doesn't increase your taxable income and doesn't show up
on the provisional income.
So taking a look at that Roth IRA is really important.
What's more important.
Don't necessarily go out and make a conversion right now.
Cause you can owe taxes on the amount that you convert.
So again, it's going to be really important to consult your dream team
in terms of what you should be doing.
But a Roth IRA is a very important part to lowering your tax exposure on your
traditional and or social security income.
Now, again, I'm going to give you the fifth tip and I think
it's the most important.
So just give me just a couple of minutes here and we'll get right to it.
The third strategy is if it's available to you, utilize, maximize, your
HSA, your health savings account.
Here money can grow into the health savings account, you can contribute it
on a pretax basis, and if the balance grows, you can take it out tax free.
Now there's a lot of pros and cons about this.
So you really need to talk to the provider to find out whether or
not it's a good thing for you more often than not at some level it is.
But in this particular case, as we talk about lowering taxes, The use of
an HSA may be very helpful for you.
Not only now in terms of paying for your health insurance costs, but down the road
in terms of retirement income as well.
The fourth tip is to review your investment holdings.
And what I want you to review here is those stocks or funds that are winners
and those that are losers, and here's where tax efficient investing comes in.
You, if you may have the ability to sell some of your losses against
some of your gains, we call that marrying up the gains and the loss.
If you were to just sell the winners, you'd pay capital gains.
You have a longterm or short term on those gains, but if at the same time
you do sell a loser, then you could offset some of those gains long-term
or short term and lower the impact of taxes on your winning investments.
Take a look at, and we've come to what I believe is the most
important thing in a game.
I think our industry's done a lousy job.
I'm sorry to hammer this home, but we call this taking a look at the income faucet.
Now, if you have both a taxable and a retirement account with substantial
money in it really need to pay attention to the income planning for retirement.
And this gets back to planning folks.
This is all about advanced planning.
Now, when you take money out of your personal account, you're going to
typically pay less taxes than if you were to take it out of here.
IRA or 401k retirement account, because almost all of that money
is going to come out fully taxable.
Now we have to look at retirement in terms of six stages.
One, when you retire up until required minimum distribution
age, that age is now 72 at age 72.
You're going to have to take out approximately.
Ballpark at three and a half percent of your overall retirement assets.
So where are you better off to identify where money needs to
come from from your portfolio?
Are we better off in the first stage to take it from the personal account?
And lower the tax bite.
And then after 72 take more of it from the retirement account, this is part
of the overall planning that goes well beyond just the money management since
so many advisors focus on and can really be the key can really be the lynchpin
to the amount of income that you get, the amount of tax efficient income
that you get that could potentially increase your bottom line in retirement.
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