Will Your Retirement State Tax Your Social Security?

It doesn’t seem right that anyone should have to pay income tax on Social Security retirement benefits, at least until the benefits paid exceed the amount of money that the recipient paid into the system over the years. But, this ship has sailed and many of us will be taxed on Social Security income. The question for today is whether you might get hit with a double tax whammy – taxed at both the federal and state levels.

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Taxes and Social Security: Random Thoughts and Concepts

My experience as a volunteer tax preparer tells me that there is a lot of confusion among retirees about how Social Security benefits are taxed. This is a significant topic and not just for tax planning purposes. Taxation of benefits is also important to the threshold decision on when to claim Social Security retirement benefits. So let’s review some basic Social Security vs. income tax concepts.

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Free Ride for Baby Boomers in Debt Commission Report?

The co-chairs of the National Commission on Fiscal Responsibility and Reform issued a preliminary report last week. The report contains their proposed strategies for reducing or eliminating the government deficit. A recent opinion piece from Chris Farrell (for Bloomberg) criticizes the report on the grounds that it gives baby boomers a “free ride.” [Read more...]

Limiting Income Taxes on Investments in a Taxable Account

Income tax rates are going up, although maybe not as soon as we expected. Until the economy begins a sustained recovery, the political will to tax our way out of extreme deficits may be lacking. Nevertheless, strategic tax-planning should always be on your retirement investing agenda. If you can save 5% in taxes, that’s not chump change when you retire.

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Preparing Your Retirement Plan for Tax Increases

One aspect of retirement planning that cannot be “set and forget” is tax planning. Our political leaders are regularly adjusting (and mostly increasing) the different taxes we must pay on our income and property. As things stand now, 2011 will begin with a host of tax increases that will affect almost everyone and particularly working baby boomers who are urgently trying to accumulate and rebuild a retirement nest egg.

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Taxes on Annuity Income to Increase

Many boomers are considering buying immediate annuities to provide a supplemental retirement income stream that is guaranteed to last for life, assuming that the insurance company remains solvent. Unfortunately for some annuity purchasers, taxation of annuity income is going to increase. [Read more...]

Your Tax Refund Introduction to I Bonds

Regular readers know that I am a fan of I-Bonds and TIPS for retirement savings. If you are at all concerned about future inflation (and you should be), you should own TIPS and/or I-Bonds as part of a diversified portfolio. This year, the federal government is making it easy for you to buy I-Bonds, also known as Series I U.S. Savings Bonds. [Read more...]

Using the Retirement Savings Credit

I have found in my experience as a volunteer tax return preparer that some folks are unaware of (or forget) the retirement savings credit that is available to some taxpayers. The basic principle for this credit is this: If you make eligible contributions to an employer-sponsored retirement plan or to an individual retirement account (IRA), you may be able to take a credit against your federal income taxes. The amount of the credit you can get is based on the contributions you make and your “credit rate.” [Read more...]