How to Reduce or Eliminate Taxes On Social Security Benefits! (How to Minimize Taxes In Retirement) Up to 85% of your social security benefits can be subject to taxation.
My Roth IRA Videos Can be found here so check them out if you want to learn more:
How rich can a Roth IRA Make You: [ Ссылка ]
Roth IRA Rules Explained: How Do Roth IRAs Work?[ Ссылка ]
Video Time Stamp Index Guide:
• How much of your social security is tax free? 0:59
• Tip#1 1:44
• Tip#2 2:28
• Tip#3 3:49
• Tip#4 4:47
• Tip#5 5:36
• Tip#6 6:52
Ways to minimize taxes on social security benefits
1. Roth IRA - The first way and my personal favorite way to minimize income taxes on your social security benefits is to have a Roth IRA. Both you and your spouse can have one. Qualified Roth ire distributions are not factored into the social security income equation which freaking awesome. As an example a person could receive $25,000 a year in dividend distributions from their Roth IRA and $25,000 a year in SSI benefits and still pay $0 tax. That’s a full $4,000 a month that you get to keep and keep it all
2. Begin taking taxable IRA distributions before drawing social – This second strategy takes a bit of planning but can be powerful. This assumes you are older than 59 ½ and can begin taking distributions from your 401(K) or traditional tax IRA.
By taking some of their IRA or 401(K) distributions early it allows them to delay drawing from their social security. This does two things:
By delaying their SSI benefits it will allow them to draw higher social security benefits in the future.
Secondly by drawing some of their IRA or 401(K) they will be able to take lower required minimum distributions in the future.
The net result = higher social benefits and helps reduce taxable income from other sources. This strategy could go very wrong if a person blows their distributions from their retirement account, however, a disciplined person could always reinvest that money into growth stocks or dividend paying stocks within a taxable brokerage account and grow the money even further. With careful throughout planning this strategy could work very well for future retires.
3. Donate RMD/Retirement distributions – Already drawing social security benefits and taking IRA distributions? No worries. You can always choose to donate a portion (or potentially all of your IRA distribution) to a qualified charity. I have seen this first hand. People who have donated to a good cause. A cause they are passionate about and saved tens of thousands of dollars in the process. This takes some planning, but can work quite well in helping one minimize their social security income taxes or income taxes in general.
4. Lower your income by quitting a part-time job – Normally I would not suggest someone quits their part-time job, but when it comes to minimizing ones income taxes on their SSI benefits this might actually make sense if a person can afford to do so. If you drastically reduce your income and taxes it might not feel like that much of a pay cut, and you will no longer have to work.
Remember the overall idea of lowering your income taxes if finding ways to reduce your taxable income.
5. Debt - Speaking of reducing your taxable income let’s talk about debt. Paying off your debts before you retire is one of the best things you can do to help you reduce your taxes. The less taxable income you need to live off of the less tax you will pay. Not only that, the longer your 401(K) and IRA investments will last you. Unfortunately most debt payments are no longer helping people from a tax perspective unless they own a business or rental estate under the new tax laws so in my opinion if you getting ready to retire or already retired I think it’s time to get rid of the debt if you can.
6. Delay taking social security benefits
Most people cannot begin to emotionally fathom the idea of delaying their social security benefits and they often react like this if you even begin to suggest it….
I realize that most people will probably not entertain the idea of delaying taking their social security, and that’s fine I get it, but what I have found from experience in the real world is the people who are very well off, those with a substantial amount of retirement assets…the ones would could afford to take a lower social payments are more likely to delay taking their benefits until full retirement age or closer to age 70.
If a person is willing to work a little longer or use other retirement assets until they are ready to start drawing social security this can be a powerful tax saving strategy. What people often forget is if their social security payment is higher each month they can draw down their other assets at a slower pace and might have more to pass on to the next generation at the end their life.
