Why Is My Social Security Being Taxed?
In this series of blogs I'm going to attempt to explain how to minimize your social security taxes. Most seniors can avoid paying higher taxes on social security by simply moving money that you are not using and getting taxed on into something tax differed. If you are single and make less than $25,000.00 a year or married and make less than $32,000 you should not have to pay any taxes on your social security. If you make 25k-34k and single you would pay 50% or 32k-44k and married you would pay 50% taxes. There are other levels and we will touch them over the next couple of weeks. Once again today we will talk about how you can save your social security from taxation with a little preplanning. Lets say that you have a 401k that you plan on using for some type of income. You also have been putting away money over the years into various taxable accounts, such as C.D.'s money market accounts and mutual funds.
What you need to do first is put a plan together. Find out what your social security benefits are, find out how much money a month or year you need to live on. Take a portion of the taxable income from your other investments and buy an immediate annuity. Your advisor can figure out what your monthly payments would be, so you can implement that into your preplanning.
Then take a majority of the rest of your assets from your 401k and other investments and start to ladder them with annuities, I would suggest a 5 year 7 year and 10 year. By doing this you give yourself tax deferral. This means that your money will not be taxed until you withdrawal it. This also would give you access to your money at different times of your life. It also gives you liquidity to move money into better products with higher rates without locking all of your money up for a longer set period of time.
If you have questions or want more info just email me at lynn.tomaro@comcast.net.