Have you reached your golden years and you’re already enjoying your Social Security benefits? Perhaps you’ve just barely reached the age of retirement and you’re still deciding whether or not you should start collecting your payments now, or if you’d be better off waiting for a few more years. Social Security benefits are an important part of many retirees’ monthly income, but for those who earn a little more than others and who expect that they might owe some taxes on their Social Security benefits, this year might be a good time to consider some tax-saving options.
Don’t Let SS Ruin Your Tax Bill
That’s because 2015 looks like a down year for Social Security. According to reports, Social Security benefits likely will not be adjusted for inflation, However, Medicare Part B premiums are expected to rise for those retirees with higher incomes. Therefore, if you can find ways to decrease your tax bill on your Social Security benefits it’s probably a good idea to take advantage of your opportunities. There are several ways to save on your tax bill if you’re a higher-income earner and you expect to owe taxes on your Social Security benefits.
Tax Saving Ideas
From delaying your benefits to rethinking your investments and retirement accounts, here are a few ideas to help you avoid a larger tax bill on Social Security.
- Give Roth a try – if you need more money in retirement and you want to keep your SS tax bill down one way you can do that is by opening a Roth IRA, which allows your money to grow tax-free. Distributions are also tax-free.
- Delay Your Benefits – one of the best ways to avoid a SS tax bill is to simply push your benefits back. Instead of starting to collect your benefits when you’re first eligible at the age of 62, you can wait. In fact, if you wait till you turn 70 your benefit could actually go up to 76 percent. Even if you’ve already started to claim your benefits you could put them off at the age of 66. They would then continue increasing until you reach 70.
- Consider Your Capital Assets – many high-income earners have capital investments and therefore, in many cases, capital gains. You can use these assets to increase your income in retirement. For example, by selling a capital asset for a profit you can use that money to live on instead of collecting your Social Security benefits.
Be Ready for Retirement
Retirement is supposed to be a time of relaxation and enjoyment and not a time of worry, especially about taxes. However, you have to make sure you are prepared financially for those golden years or they could turn gray very quickly. No two situations are exactly the same, so be sure to consider all your options and determine which strategy is best for your circumstances. Just make sure you do something, because you don’t want get caught behind the tax eight ball and end up owing more than you can handle, especially in retirement.