Social Security Wasn’t Meant to Be Your Whole Retirement Plan

Over 40% of retirees count on Social Security for at least half their income. That’s a problem. The program was never designed to fully fund your retirement—it was created to provide a foundation. That consistent monthly deposit can help with everyday expenses, but it doesn’t stretch well when surprises hit—like home repairs, medical bills, property taxes, or that bucket-list trip.

If you don’t have additional savings, these one-time expenses often go straight onto a credit card, adding unnecessary financial pressure.

Cost-of-Living Adjustments Don’t Always Keep Up

Social Security includes annual cost-of-living adjustments (COLAs), but they’re based on the Consumer Price Index (CPI), which reflects the spending habits of working adults—not retirees. That’s a major issue. Retirees spend more on housing, healthcare, and services—not on gas and electronics.

Worse, COLAs are delayed by a full year. So when inflation spikes (like it did in 2022), your benefits don’t increase until the following year. That lag time hurts, and over time, the gap between your actual expenses and your adjusted income widens.

Yes, Your Benefits Can Be Taxed

A lot of people don’t realize that Social Security benefits are taxable. It depends on your “provisional income,” which includes half of your Social Security benefits plus other income, like IRA withdrawals or pensions.

Here’s an example: A single retiree with $2,500/month in Social Security and $10,000/year in IRA withdrawals may not owe taxes at first. But over time, COLAs and rising withdrawals can push their income over the $25,000 threshold, triggering taxes on up to 85% of their benefits.

So even if your gross income rises with inflation, your net income can actually fall. That’s the kind of surprise no one wants in retirement.

Anxiety Over Social Security’s Future Is Real

Let’s be honest—many people are worried about whether Social Security will still be around in 10 or 20 years. The projections aren’t comforting: some forecasts suggest a 20% cut in benefits if no legislative action is taken.

That’s why I encourage clients to aim for peace of mind—not just survival. Relying too heavily on a system that’s under political and financial strain can cause real anxiety. Diversifying your income sources creates freedom and flexibility—two things we all want in retirement.

How to Supplement Your Social Security

So, what’s the plan? First, make the most of what Social Security offers. If you can delay claiming until age 70, you’ll maximize your monthly benefit. That extra income can give you a little breathing room for things like travel or unexpected bills.

Second, build up your savings and investment portfolio. Having supplemental income gives you options—you can dial up spending in good years and pull back during market dips. Flexibility is your financial superpower.

Third, think creatively about your biggest asset: your home. Downsizing, relocating to a lower-cost area, or even exploring a reverse mortgage (as a last resort) can free up cash. But remember, reverse mortgages should be considered cautiously—they’re a tool, not a first move.

The Bottom Line

Social Security is just one piece of your retirement puzzle. Don’t put all your eggs in that one basket. With a little planning and some smart moves, you can create a retirement that’s flexible, resilient, and—most importantly—stress-free.

You should always consult a financial, tax, or legal professional familiar about your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns.

Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost.

The post Why You Shouldn’t Rely Solely on Social Security for Retirement appeared first on ROI TV.

Using Tax Gain Harvesting to Pay $0 in Taxes
One of the most overlooked strategies in retirement is tax gain harvesting. If you’re in the 0% long-term capital gains bracket $48,350 for singles and $96,700 for married couples in 2025 you can sell appreciated investments and pay zero federal tax. Take Joe Sample, a single retiree. He pulled $15,000 from his IRA, which was offset entirely by the standard deduction. Then he sold $60,000 in stocks from his brokerage account. Because his cost basis was $250,000 and his account was worth $1 million, $15,000 was a return of capital and $45,000 was a taxable gain still under the 0% capital gains threshold. Total tax owed? $0. That’s what smart timing and a little math can do.

Avoiding the Social Security Tax Torpedo
This one sneaks up on retirees. It’s called the Social Security tax torpedo, and it happens when other income like IRA withdrawals increases your provisional income and triggers taxes on your benefits. For example, let’s say you and your spouse receive $50,000 from Social Security and take out $40,000 from your IRA. Your provisional income hits $65,000, and suddenly, $23,850 of your Social Security becomes taxable. That bumps your effective tax rate to over 22%, even though you thought you were in the 12% bracket. It’s not just about how much you withdraw it’s about how all your income sources interact.

Getting Roth Conversions Just Right
Roth conversions are one of the most powerful tools for reducing future tax burdens—but only when done correctly. Consider John and Sally. They have $2.5 million in an IRA, and if they don’t act, their required minimum distributions (RMDs) will push them into higher brackets later. By converting a portion of their IRA now, while staying within the 12% tax bracket, they avoid a larger tax hit in the future. But there’s a catch. If you over-convert like in another scenario where a couple converted too much of a $250,000 IRA at once they faced a six-figure loss in after-tax wealth. The trick is to convert enough to reduce future RMDs, but not so much that you spike your current tax bill.

Why These Strategies Matter
In retirement, tax planning becomes more important not less. It’s not just about how much you’ve saved, but how much you get to keep. Understanding how capital gains, Social Security benefits, and IRA distributions all play together can mean the difference between a comfortable retirement and one filled with surprises. A personalized tax map based on your income, assets, and goals can help you take advantage of the 0% capital gains bracket, minimize the impact of the tax torpedo, and convert your Roth IRA with confidence.

You should always consult a financial, tax, or legal professional familiar about your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns.

Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost.

The post The Retirement Tax Moves That Could Save You Thousands appeared first on ROI TV.

Let’s explore why that change happened, how Social Security benefits are taxed today, and what it could mean for retirees if the tax were eliminated.

How Social Security Became Taxable in the First Place

In 1983, the Social Security Act was amended to introduce federal income tax on Social Security benefits. This change was recommended by the Greenspan Commission, which was tasked with addressing a looming funding crisis in the Social Security trust fund.

The logic behind the decision was twofold. First, other types of retirement income—like private pensions—were already being taxed, so this was seen as a move toward fairness. Second, the Commission found that many retirees were receiving more in benefits than they had contributed during their working years. With life expectancy increasing, the system needed new ways to remain solvent.

Who Pays Taxes on Social Security Benefits?

Not everyone pays taxes on their Social Security income, but more people are being affected each year. The determining factor is something called “provisional income,” which is calculated by adding:

• Adjusted Gross Income (AGI)
• Tax-exempt interest
• 50% of your Social Security benefits

This combined total is used to determine whether your benefits are taxable.

When the tax was first introduced in 1983, the thresholds were:

• Single filers with provisional income under $25,000 paid no tax
• Married couples filing jointly with income under $32,000 paid no tax
• Above those amounts, up to 50% of benefits could be taxed

In 1993, a second tier was added through the Omnibus Budget Reconciliation Act:

• Single filers with provisional income above $34,000
• Married couples above $44,000
• Now up to 85% of benefits could be taxed

These thresholds have never been adjusted for inflation, so more retirees are being pushed into paying taxes on their benefits even though their real purchasing power may not have increased.

Real-World Examples: How Much Tax Are We Talking About?

Let’s break down how this plays out for different types of retirees.

Example 1: A married couple with $30,000 in AGI and $24,000 in Social Security benefits has a provisional income of $42,000. That puts them in the range where 50% of their Social Security income—$12,000—is taxable. At a 12% tax rate, that’s $1,440 in taxes. If Social Security income weren’t taxed, they would save that amount and might even drop into a lower tax bracket.

Example 2: Another married couple earns $90,000 in AGI, including $60,000 from the wife’s income, plus $24,000 in Social Security. Their provisional income is $102,000, which means 85% of their benefits—$20,400—are taxable. At a 22% tax rate, they pay $4,480 in taxes on their benefits. Eliminating the tax could save them that full amount.

Example 3: A single filer has $12,000 in AGI from a private pension and receives $24,000 in Social Security. Their provisional income is $24,000, which is below the $25,000 threshold, so none of their benefits are taxed. In this case, abolishing the tax would have no effect.

What Would Happen If Social Security Benefits Weren’t Taxed Anymore?

Eliminating the tax would significantly benefit many retirees, especially those in higher tax brackets. Not only would they keep more of their income, but they could also be bumped into a lower tax bracket, reducing their overall liability.

However, this change would come at a cost to the Social Security trust fund, which currently benefits from the revenue generated by taxing Social Security benefits. To offset that loss, lawmakers would need to find new ways to fund the program—possibly by raising the wage cap, adjusting benefits, or introducing new taxes elsewhere.

What About Medicare?

While Social Security gets most of the attention, Medicare is just as important and often just as confusing. The right Medicare decisions can save retirees thousands of dollars, while the wrong ones can result in penalties and coverage gaps.

If you’re unsure about your eligibility or which plan is right for you, consider taking a Medicare quiz or consulting a specialist to avoid costly mistakes.

Want More Like This?

If this kind of breakdown is helpful, check out our Medicare School series where we simplify retirement topics like Social Security, Medicare, and financial planning. Whether you prefer to read or watch, we make it easy to stay informed and confident in your decisions.

The post Should We Still Be Taxing Social Security Benefits? Here’s What You Need to Know appeared first on ROI TV.