Transcript

If you’re in the process of retirement planning, chances are you’ve looked at your estimated Social Security payments. But have you done the math to see if your payments will be subject to income tax? Just a $1 change in income can be the difference between whether 0%, 50%, or 85% of your Social Security payments are taxed.

Your first step toward solving this problem is to look at your combined income and compare it to the current SSA thresholds. Social Security defines your combined income as your adjusted gross income + nontaxable interest + ½ of your annual Social Security benefits. I typically review my client’s tax returns to gather this information. Based on your combined income and tax filing status, you’ll be able to see how much, if any, of your Social Security income will be subject to federal income tax. It’s important to note that you may need to pay income taxes at the state level as well, depending on where you live.

If your Social Security income will be subject to taxes, you may want to consider setting up automatic tax withholding on your payments with the SSA. This election is often missed by retirees when they first file for payments, and it can quite the confusion come tax filing time when they’re hit with an unexpected tax bill instead of a refund. If you did not elect to withhold taxes when you first filed for your payments, don’t worry – you can change your elections anytime with SSA Form W4-V, which you can find online at SSA.gov.

Here’s another little-known fact – the amount of your Social Security benefit that is considered taxable can affect how your other sources of investment income are taxed, such as qualified dividends and capital gains. When it comes to retirement planning, everything is so interconnected. Many retirees don’t want to keep on top of it all in their golden years. That’s where a comprehensive financial planning firm like Savant can help. So if you’re considering hiring someone to help you, I have another video that shares what you need to know to evaluate the true cost of any financial advisor. We’ll link it up for you at the end of this video.

My name is Jake and I am a Financial Advisor with Savant Wealth Management. If you’re looking for help as you navigate the many steps involved in the retirement process, including Social Security, I encourage you to get in touch. Let’s figure this out together.

Author Jakob C. Loescher Financial Advisor / Team Lead

In 2016 Jake was recognized by the Rockford Chamber of Commerce as one of 40 Leaders Under Forty. In 2023, for the sixth time in seven years, he was named on Forbes’ list of America’s Top Next Generation Wealth Advisors.

About Savant Wealth Management

Savant Wealth Management is a leading independent, nationally recognized, fee-only firm serving clients for over 30 years. As a trusted advisor, Savant Wealth Management offers investment management, financial planning, retirement plan and family office services to financially established individuals and institutions. Savant also offers corporate accounting, tax preparation, payroll and consulting through its affiliate, Savant Tax & Consulting.

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