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Are Your Social Security Retirement Benefits Taxable?

Posted by Michael J. O'Connor | CWS®, Vice President Investments
June 12, 2014

If you generate retirement income from non-Social Security sources, like an investment portfolio or rental properties, your Social Security retirement benefits are probably taxable. It’s important to keep this in mind as you work through retirement income planning with your financial advisor, so you can anticipate what the taxes are and how you should adapt your investment plan to account for them.

Here’s a basic example of how it works:

Let’s say you’re a married couple filing jointly, and your combined Social Security retirement benefits for 2013 were $10,000. You also received $25,000 in income from a pension, and withdrew $15,000 from your investment portfolio.

To determine if your benefits may be taxable, simply take one-half of your Social Security retirement income amount, in this case $5,000, and add it to all your other sources of income: $5,000 + $25,000 + $15,000 = $45,000.

If your income total exceeds $25,000 (single) or $32,000 (married filing jointly), which in this example it does, then part of your Social Security income is taxable. You would most likely have to file a return for your Social Security Benefits received on Form 1040 or 1040A.1

How Much of Your Social Security Retirement Benefits are Taxable?

The amount of your benefits that are taxable depends on the income total you have for the year. Generally, the higher the income total, the greater the taxable part of your benefits. If your income totals exceed $34,000 (single) or $44,000 (married filing jointly), then up to 85% of your Social Security retirement benefits could be taxable.1

Factoring-In Taxes as Part of Retirement Income Planning

You can speak to your tax advisor in more detail about the rules surrounding taxation of Social Security retirement benefits, although you’ll most likely have to pay the taxes.

What’s more important is simply having the knowledge that these taxes exist, so that when you’re mapping out your retirement income sources for the year with your financial advisor and doing tax planning, you take all variables into account. Good planning starts with having all the relevant facts.

If you’d like to speak with one of our Wealth Managers about your retirement income strategy, please give us a call at 1-800-541-7774 or simply send us an email to Wealth@wrapmanager.com. We can run a free analysis of your investment portfolio and your retirement income sources throughout your life, to show you how on track you are to reach your goals.

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1 IRS.gov


To the extent this presentation includes any state or federal tax advice, the presentation is not intended or written by WrapManager, Inc. to be used, and cannot be used, for the purpose of avoiding federal tax penalties. WrapManager, Inc. does not advise on any income tax requirements or issues. Use of any information presented by WrapManager, Inc. is for general information only and does not represent tax advice either express or implied. You are encouraged to seek professional tax advice for income tax questions and assistance.

Social Security Benefits Retirement Income Strategy