A well-structured retirement plan serves as the foundation for achieving long-term financial security. Surprisingly, a significant portion of individuals lack a formal retirement strategy, leaving them vulnerable to financial uncertainties. By developing a detailed plan, you can set clear goals, monitor progress, and make informed decisions to secure your financial future.

2. Common Retirement Planning Pitfalls

Several prevalent mistakes can jeopardize retirement security:

• Claiming Social Security Benefits Too Early: Initiating benefits at the earliest eligibility age can result in a permanent reduction of up to 30% in monthly payments. Delaying benefits until full retirement age or later can significantly increase monthly income. morganstanley.com
• Premature Withdrawal from Retirement Accounts: Accessing retirement funds before reaching the appropriate age can lead to substantial taxes and penalties, diminishing the overall value of your savings. It’s crucial to explore alternative funding sources for immediate financial needs to preserve retirement assets.
• Lack of a Withdrawal Strategy: Without a clear plan for withdrawing funds during retirement, individuals risk depleting their savings too quickly or incurring unnecessary tax liabilities. Implementing a tax-efficient withdrawal strategy can help maintain financial stability throughout retirement.

3. Optimizing Social Security Benefits

Strategic planning is essential to maximize Social Security benefits:

• Delayed Claiming: Waiting until age 70 to claim benefits can result in monthly payments that are up to 132% of the primary insurance amount, providing a substantial increase in lifetime income.
• Spousal Benefits: Married couples can enhance their combined benefits by coordinating their claiming strategies, considering factors such as age differences and individual earnings records.

4. Developing a Tax-Efficient Withdrawal Strategy

A well-planned withdrawal strategy can minimize tax burdens:

• Understanding Account Types: Different accounts—taxable, tax-deferred, and tax-free—have varying tax implications. Strategically planning withdrawals from these accounts can optimize after-tax income.
• Required Minimum Distributions (RMDs): Failing to take RMDs from certain retirement accounts can result in significant penalties. It’s important to be aware of RMD rules and plan accordingly.

5. Seeking Professional Financial Advice

Given the complexities of retirement planning, consulting with a certified financial planner or CPA can provide personalized strategies tailored to your unique circumstances, helping you avoid common pitfalls and achieve your retirement goals.

By proactively addressing these common retirement planning mistakes, you can establish a more secure and fulfilling financial future.

Intended for educational purposes only. Opinions expressed are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Neither the information presented, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Consult your financial professional before making any investment decisions. Opinions expressed are subject to change without notice.

IMPORTANT DISCLOSURES:

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.

• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.

The post 5 Money Mistakes That Can Sabotage Your Retirement appeared first on ROI TV.

Collecting Social Security While Working

Yes, you can collect Social Security benefits while working, but there are some important rules and limitations to keep in mind. In 2025, the earnings limit is $23,400 for those under full retirement age (FRA). If you earn more than this threshold, Social Security will withhold $1 for every $2 earned above the limit.

AARP

It’s essential to know that only wages count toward this calculation—dividends, pensions, and rental income are excluded. Additionally, spousal income does not factor into the earnings limit for the individual collecting benefits.

If you reach full retirement age in 2025, the earnings limit rises to $62,160, and the withholding amount changes to $1 for every $3 earned above the threshold. Earnings prior to starting benefits don’t count toward the limit, so timing is critical if you’re considering collecting while still working.

AARP

Reporting Earnings to Social Security

When you apply for Social Security benefits, you’ll need to estimate your earnings for the year. Based on this estimate, Social Security adjusts your benefits and withholds the appropriate amount if necessary. At the end of the year, your actual earnings are verified, and adjustments are made. If you underreport your income, you might need to repay the excess benefits.

Options if You Return to Work After Collecting Benefits

Plans can change, and if you decide to return to work after starting to collect Social Security, you have two main options:

• Withdraw Benefits: If you’ve been collecting benefits for less than 12 months and are under FRA, you can withdraw your benefits and repay what you’ve received. This effectively “resets” your benefits.
• Suspend Benefits: If you’re at FRA or older, you can suspend your benefits without repayment. Your benefits will increase by 8% per year until you resume them.

Recalibration of Benefits After Withholding

If your benefits were withheld because you exceeded the earnings limit, Social Security recalibrates them when you reach FRA. This recalibration adjusts your benefit amount to account for the months withheld, effectively reducing the penalty for early collection. The result is a higher monthly benefit going forward.

Common Misconceptions About Retirement

Planning for retirement isn’t just about finances—it’s also about avoiding common pitfalls. Here are five misconceptions to keep in mind:

1. Relying on Two Incomes Forever If one spouse passes away, the surviving spouse often faces a significant income shortfall. It’s essential to plan for this possibility with life insurance or other income sources.
2. The Stock Market as the Biggest Risk Many retirees fear the stock market, but over the long term, it has historically outperformed “safe” investments like Treasury bills. Proper diversification can help mitigate risk while still allowing for growth.
3. Ignoring Inflation Inflation is one of the biggest threats to a secure retirement. Even a modest 3% inflation rate can significantly erode purchasing power over a 30-year retirement. Growth-oriented investments are essential to keep up with rising costs.
4. Considering the Home as a Retirement Asset Unless you plan to sell or monetize your home, it doesn’t generate income and can even become a liability due to maintenance and property taxes. View your home as a place to live, not your primary financial cushion.
5. Loving Not Having a Job While the freedom from work can be exhilarating, retirees often find they miss structure and purpose. Having a plan for how to use your time meaningfully—whether through hobbies, volunteering, or part-time work—is crucial for a fulfilling retirement.

Final Thoughts

Whether you’re navigating Social Security rules while working or challenging long-held assumptions about retirement, the key is thoughtful planning. Retirement isn’t a one-size-fits-all journey—it’s about aligning your financial strategies with your goals and priorities.

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 Navigating Social Security and Common Retirement Misconceptions in 2025 appeared first on ROI TV.

Greg and Sherry, both 62, are ready to retire and plan to spend $6,000 per month during their retirement. Their financial foundation includes:

• Greg’s 401(k): $492,000
• Sherry’s 401(k): Over $400,000
• Sherry’s Roth IRA: $60,000
• Savings: $25,000
• Joint Investment Account: $132,000
• Home Value: $650,000 (fully paid off)

Their projected expenses include annual pre-Medicare healthcare costs of $8,000 per year (ages 62–65) and $7,000 annually after Medicare kicks in. Total living expenses, including inflation adjustments, are $72,000 per year. These costs will require careful income and portfolio management to maintain their desired retirement lifestyle.

Their investment strategy is structured with 90% in diversified stocks and 10% in bonds, targeting an annual return of 8.8%. This aggressive allocation has been stress-tested to ensure it can withstand market fluctuations.

Social Security Collection Scenarios

The timing of their Social Security benefits is critical to ensuring portfolio sustainability. Here’s how the key scenarios compare:

Scenario 1: Collecting at Age 62

• Immediate benefit starts at age 62, providing $26,880 in cumulative benefits by age 63.
• Lower monthly benefit results in less income over time.

Scenario 2: Collecting at Age 67

• No benefits collected until age 67, but higher monthly payments result in a $400,000 cumulative advantage by age 95 compared to starting at 62.

Scenario 3: Delaying to Age 70

• Waiting until age 70 maximizes monthly payments but requires spending down portfolio assets in the interim.
• Results in a $400,000 decrease in portfolio value by age 95, assuming an 8.8% growth rate.
• If the portfolio growth rate is reduced to 6.3%, delaying to age 70 becomes advantageous, adding $850,000 to the total value by age 95.

Key Insights

• Collecting benefits at age 62 provides an immediate cash flow benefit but may leave money on the table long-term.
• Waiting until age 67 strikes a balance, ensuring higher lifetime benefits without depleting portfolio assets significantly.
• Delaying until age 70 is beneficial under lower portfolio growth assumptions but introduces opportunity costs with higher upfront withdrawals.

Highlighted Results

• Best Option for Strong Growth Rates (8.8%): Collecting at age 67 provides a $400,000 lifetime advantage by age 95.
• Best Option for Moderate Growth Rates (6.3%): Delaying to age 70 yields an $850,000 advantage by age 95.
• Key Takeaway: Strategic Social Security timing significantly impacts financial success, with higher lifetime benefits achievable through careful planning.

Comprehensive Planning Matters

Rather than relying on simplistic break-even analyses, retirees should consider growth assumptions, tax implications, and long-term financial goals. A holistic approach ensures Social Security timing aligns with broader retirement objectives, optimizing financial security and flexibility.

By thoughtfully integrating Social Security decisions into a broader financial plan, retirees like Greg and Sherry can secure a sustainable and fulfilling retirement.

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 Optimizing Social Security Timing: Key Strategies for Retirement Success appeared first on ROI TV.

Historical Background

Prior to 1984, Social Security benefits were exempt from federal income taxes. This changed with the Social Security Amendments of 1983, signed into law by President Ronald Reagan. The amendments introduced taxation on up to 50% of Social Security benefits for individuals and couples whose income exceeded certain thresholds. In 1993, legislation expanded this taxation, allowing up to 85% of benefits to be taxable for higher-income beneficiaries. Notably, the income thresholds established in the 1980s have not been adjusted for inflation, leading to a larger portion of beneficiaries being taxed over time.

ssa.gov

Current Impact

As of 2025, individuals with combined income over $25,000 and couples over $32,000 may have up to 50% of their Social Security benefits taxed; this increases to 85% for individuals above $34,000 and couples above $44,000. The lack of inflation adjustment means more retirees are subject to these taxes, impacting their financial stability. In 2023, taxation of benefits contributed approximately $50.7 billion to Social Security’s trust funds, accounting for 3.8% of its total income.

crsreports.congress.gov

Proposed Changes

Recent legislative efforts aim to alleviate the tax burden on Social Security recipients. The Senior Citizens Tax Elimination Act, reintroduced by Representatives Thomas Massie and Daniel Webster, proposes ending federal income taxes on Social Security benefits. While this could increase retirees’ income, analyses suggest it may reduce federal revenues by $1.5 trillion over the next decade and accelerate the depletion of Social Security’s trust fund from 2034 to 2032.

newsnationnow.com

Additionally, President Donald Trump has advocated for the elimination of these taxes, aligning with his campaign promises. However, concerns arise regarding the potential exacerbation of Social Security’s funding challenges. Experts emphasize the need for comprehensive reforms to ensure the program’s solvency while addressing beneficiaries’ needs.

reuters.com

Conclusion

The taxation of Social Security benefits remains a complex issue, balancing the financial needs of retirees with the sustainability of the program. As discussions continue, it’s essential for individuals to stay informed and consider how potential changes may affect their retirement planning.

All writings are for educational and entertainment purposes only and does not provide investment or financial advice of any kind.

The post President Trump Wants to Eliminate Taxes on Social Security appeared first on ROI TV.

1. Relying on Dual Incomes Indefinitely

Many couples anticipate maintaining dual Social Security incomes throughout retirement. However, upon the death of a spouse, the surviving partner typically receives only the higher of the two benefits, resulting in a significant income reduction. It’s essential to plan for such contingencies by increasing savings or adjusting expenses to ensure financial stability.

Edelman Financial Engines

2. Overestimating Stock Market Risks

While the stock market does present risks, especially in the short term, historical data indicates that long-term investments generally yield positive returns. For instance, over a 20-year period, the S&P 500 has consistently provided average annual returns, outperforming more conservative investments like Treasury bills. Avoiding stock market investments due to fear can lead to missed opportunities for growth.

Morgan Stanley

3. Underestimating Inflation’s Impact

Inflation erodes purchasing power over time. Relying solely on low-yield, conservative investments may result in returns that don’t keep pace with inflation, effectively diminishing the real value of your savings. Incorporating investments with the potential to outpace inflation is crucial for preserving purchasing power in retirement.

Edelman Financial Engines

4. Viewing Your Home as a Liquid Retirement Asset

While home equity contributes to your net worth, it doesn’t provide liquid funds for daily expenses unless you downsize, take out a reverse mortgage, or sell the property. Additionally, homeownership entails ongoing costs like maintenance, property taxes, and insurance. It’s important to consider these factors and not rely solely on home equity to fund retirement.

Edelman Financial Engines

5. Assuming Retirement Equals Uninterrupted Leisure

The transition from a structured work environment to retirement can be challenging. Without purposeful activities, retirees may experience a sense of aimlessness. Planning for engaging pursuits, hobbies, or part-time work can provide structure and fulfillment in retirement.

NCOA

6. Working While Collecting Social Security

It’s possible to work while receiving Social Security benefits, but earnings limits apply. Exceeding these limits can result in reduced benefits. For 2024, the earnings limit is $21,240; earning above this results in $1 withheld for every $2 over the limit. Understanding these rules is essential to avoid unexpected reductions in benefits.

Edelman Financial Engines

7. Misunderstanding Earnings Limits and Benefit Adjustments

If your benefits are reduced due to excess earnings, Social Security recalculates your benefit amount upon reaching full retirement age, potentially increasing future payments. However, it’s important to be aware of the immediate impact on your income and plan accordingly.

Edelman Financial Engines

8. Options for Withdrawing or Suspending Benefits

If you return to work after starting Social Security benefits, you have options:

• Withdrawal: Within the first 12 months of receiving benefits, you can withdraw your application, repay the benefits received, and restart later at a higher amount.
• Suspension: After reaching full retirement age, you can suspend benefits to earn delayed retirement credits, increasing your benefit by 8% per year until age 70.

These strategies can enhance your benefits but require careful consideration of your financial situation.

Edelman Financial Engines

By addressing these misconceptions and implementing informed strategies, you can enhance your financial security and enjoy a more fulfilling retirement.

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 Top Retirement Fallacies appeared first on ROI TV.

A Brief History of Social Security and COLA Adjustments
Social Security was introduced in 1935 as part of the New Deal, but it wasn’t until 1940 that the first benefits were issued. Ida Fuller, a legal secretary, became the program’s first recipient, eventually drawing over $22,000 during her lifetime. Initially, increases to Social Security payments required acts of Congress, which were often influenced by political considerations.

That changed in 1975, when the Nixon Administration implemented automatic, formula-based COLA adjustments. These adjustments are tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), ensuring that benefits increase annually to account for inflation.

How COLA Is Calculated
The COLA for Social Security is determined by comparing the CPI-W for the third quarter of the previous two years. For 2025, the CPI-W comparison resulted in a 2.5% increase. This adjustment means an average increase of $50 per month for Social Security recipients, helping them maintain purchasing power in the face of rising costs.

Recent Trends in COLA Adjustments
In the past decade, the average annual COLA increase has been 2.6%. Notable adjustments include:

• 2020: 1.6%
• 2021: 1.3%
• 2022: 5.9%
• 2023: 3.2%

These figures highlight the variability of COLA adjustments, which are directly tied to inflation trends.

Impact of the 2025 COLA on Benefits
The 2025 COLA will bring increases across various Social Security benefit categories:

• Retirement Benefits: Average monthly benefits will rise from $1,927 in 2024 to $1,977 in 2025.
• Survivor Benefits: Widows and widowers will see an increase from $1,788 to $1,832.
• Disability Benefits: Payments will rise from $1,542 to $1,580.
• Maximum Benefits at Full Retirement Age: The maximum will grow from $3,822 to $4,018.

These adjustments provide tangible financial relief for recipients, particularly in a high-cost economic environment.

Future Beneficiaries and the Impact of COLA Adjustments
COLA adjustments aren’t just for current recipients; they also benefit future beneficiaries. Even if an individual hasn’t yet claimed Social Security benefits, their Primary Insurance Amount (PIA)—calculated using the top 35 years of indexed earnings—continues to grow with each COLA adjustment. This ensures that their eventual benefits reflect inflationary changes over time.

How Social Security Benefits Are Calculated
Benefits are derived from the PIA, which is based on the Average Indexed Monthly Earnings (AIME). AIME is calculated by dividing an individual’s highest 35 years of earnings by 420 months. Benefits are then calculated using bend points:

• 90% of the first $1,226 of AIME.
• 32% of the next $5,274.
• 15% of any amount above that.

This formula ensures that lower-income workers receive a higher percentage of their pre-retirement income.

Full Retirement Age and Its Impact on Benefits
Full Retirement Age (FRA) varies by birth year, with most people today having an FRA of 67. Choosing to take benefits earlier than FRA reduces monthly payments by about 6% per year, up to a maximum reduction of 30% for benefits claimed at age 62. Conversely, delaying benefits past FRA can result in increases of up to 24% if delayed until age 70.

Final Thoughts
Social Security’s annual COLA adjustments are vital for preserving the purchasing power of retirees, survivors, and disabled beneficiaries. The 2.5% COLA for 2025 reflects the program’s ongoing commitment to adjusting benefits in line with inflation.

Whether you’re already receiving Social Security or planning for the future, understanding how COLA works and its impact on your benefits is key to effective financial planning. If you’re nearing retirement, consider consulting a financial advisor to maximize your Social Security benefits and secure your financial stability.

The post Understanding Social Security’s Cost of Living Adjustments (COLA) for 2025 appeared first on ROI TV.

Financial Planning for Retirement

As you progress through life, your retirement planning strategies must evolve:

• Reality Check: Strategies for retirement at age 40 differ significantly from those at 60 or 80.
• Start Early: Set clear savings goals and estimate how much you’ll need for your retirement nest egg.
• Account for Inflation: Inflation can erode purchasing power, so your plan must include strategies to grow your assets and maintain your lifestyle.

Investment Strategies and Risk Management

Tailoring your investment strategy to your life stage is crucial:

• Aggressive Investments: Younger individuals may benefit from higher-risk, growth-oriented portfolios.
• Conservative Approach: As retirement nears, shift toward income-focused and lower-risk investments.
• Combat Inflation: Growth-focused investments can help counteract inflation’s impact on purchasing power.

Social Security and Medicare Planning

Understanding and maximizing benefits is key to financial security:

• Social Security Timing: Claiming Social Security at 62 reduces benefits, while delaying until 70 increases lifetime income.
• Medicare Essentials: Sign up for Medicare at 65 to avoid penalties. Understand the different parts (A, B, C, D) and consider supplemental insurance to fill coverage gaps.

Withdrawal Strategies and Tax Planning

A well-thought-out withdrawal strategy ensures your retirement savings last:

• The 4% Rule: Use this guideline to determine sustainable annual withdrawals from your portfolio.
• Tax Efficiency: Plan withdrawals to minimize tax burdens by leveraging tax-free accounts, Roth conversions, and charitable contributions.

Common Triggers for Early Retirement

Unexpected events often lead to early retirement:

• Health Issues: These are the leading cause of early retirement.
• Job Layoffs: Economic downturns or corporate changes can force earlier-than-planned retirements.
• Be Prepared: Have a contingency plan in place to manage savings and adjust spending if you retire earlier than expected.

Financial Reality Check and Tools

Staying on track requires regular evaluations and resources:

• Checklist: Use tools like a Retirement Reality Checklist to assess progress and make necessary adjustments.
• Plan Ahead: Regularly evaluate your savings goals, risk tolerance, and retirement income strategies to stay aligned with your objectives.

Conclusion

Adapting your financial plans as you move through different life stages is essential to achieving a secure and fulfilling retirement. By accounting for changing needs, inflation, and potential setbacks, you can build a plan that evolves with you and supports your goals. Take action today to ensure your financial future remains on track.

Intended for educational purposes only. Opinions expressed are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Neither the information presented, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Consult your financial professional before making any investment decisions. Opinions expressed are subject to change without notice.

IMPORTANT DISCLOSURES:

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.

• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.

The post Adjust Your Financial Plans to Fit Every Stage of Life appeared first on ROI TV.

The Importance of Having a Retirement Plan

A comprehensive retirement plan is the foundation for financial security:

• Set Clear Goals: Writing down your retirement goals and understanding your lifestyle needs creates accountability and helps ensure your plan is executed.
• Current Savings Reality: Many people are unaware of how much they’ve saved. Statistics reveal a significant number of individuals in their 40s and 50s have less than $50,000 saved.
• Start Now: The earlier you start, the more time compound interest has to work in your favor.

How to Fast-Track Retirement Savings

For those who feel behind, there are practical steps to accelerate savings:

• Savings Benchmarks: To accumulate $500,000, you’d need to save $7,000/month over 5 years or $2,800/month over 10 years.
• Maximize Contributions: Contribute to 401(k) and IRA accounts, taking full advantage of catch-up contributions if you’re over 50.
• Leverage Compound Interest: The longer your savings grow, the greater the potential returns.

Social Security Strategies

Understanding Social Security benefits is critical to maximizing retirement income:

• Age Matters: Claiming benefits at 62 reduces your lifetime income, while delaying until age 70 can significantly increase payouts.
• The 4% Rule: Use this guideline to estimate how much savings you need to generate your desired income in retirement.
• Delay for More: Postponing benefits can be especially beneficial for those who expect to live longer.

The Role of Tax Diversification

Tax-efficient retirement savings can optimize your income in retirement:

• Account Variety: Use tax-deferred accounts (401(k)s), tax-free accounts (Roth IRAs), and taxable brokerage accounts for maximum flexibility.
• Roth Conversions: Convert traditional retirement funds into Roth IRAs to enjoy tax-free growth and withdrawals later.
• Balance Withdrawals: A mix of account types allows you to manage taxes effectively.

The Impact of Working Longer

Extending your working years, even part-time, offers several benefits:

• More Savings Time: Working longer provides additional years to save and invest.
• Delaying Social Security: Postponing benefits increases monthly payouts.
• Income Boost: A couple retiring at 70 can nearly double their retirement income compared to retiring at 62.

Avoiding Common Financial Mistakes

Protect your retirement savings by avoiding these pitfalls:

• Stay Focused: Don’t use retirement funds for non-retirement expenses like vacations or children’s education.
• Prioritize Retirement: While supporting adult children is admirable, it shouldn’t come at the expense of your future security.
• Avoid Cashing Out: Large withdrawals can trigger significant tax liabilities and jeopardize long-term goals.

Accessing Home Equity in Retirement

Your home can be a valuable financial resource:

• Reverse Mortgages: Provide funds while allowing you to stay in your home.
• Home Equity Loans: Offer another option for accessing equity, but require careful consideration of repayment terms.
• Explore Options: Understand the pros and cons of each strategy before making decisions.

Accounting for Inflation

Inflation can erode purchasing power, so plan accordingly:

• Use Conservative Rates: Assume an inflation rate of 3.5% to 4% when planning future expenses.
• Adjust Investments: Ensure your portfolio includes assets that can outpace inflation to maintain your lifestyle.

Conclusion

Fast-tracking retirement savings requires focus, strategy, and proactive decision-making. By maximizing contributions, delaying Social Security, and leveraging tax-efficient strategies, you can catch up and secure a stable financial future. Start today to ensure the retirement you deserve.

Intended for educational purposes only. Opinions expressed are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Neither the information presented, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Consult your financial professional before making any investment decisions. Opinions expressed are subject to change without notice.

IMPORTANT DISCLOSURES:

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.

• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.

The post Fast-Track Your Retirement Savings: Strategies for Those Over 40 appeared first on ROI TV.

Medicare Costs for 2025
Medicare Part A remains premium-free for individuals who have paid Medicare taxes for at least 40 quarters. However, those with 30–39 quarters of coverage will pay $285 per month, while those with fewer than 30 quarters will pay $518 per month.

Medicare Part B premiums are increasing from $174.79 to $185 per month in 2025. High-income earners will face additional costs due to the Income-Related Monthly Adjustment Amount (IRMAA). For single filers, the income threshold for IRMAA will rise to $106,000, and for married couples filing jointly, it will increase to $212,000.

Medicare Part A and Part B Costs and Coverage Gaps
The Medicare Part A deductible for inpatient care will be $1,676 in 2025, covering up to 60 days of hospitalization. Beyond this, co-pays will be $419 per day for days 61–90 and $838 per day for days 91–150. For skilled nursing facilities, co-pays will be $209.50 per day for days 21–100.

Medicare Part B will have a deductible of $257, with Medicare covering 80% of costs after the deductible is met. Patients are responsible for the remaining 20%, along with any excess charges, which occur in less than 5% of cases and can reach up to 15%.

Supplemental Plans (Medigap)
To help cover Medicare gaps, many opt for Medigap plans. Plan F covers all gaps but is only available to those who started Medicare before January 1, 2020. Plan G, the most comprehensive option for new enrollees, covers all gaps except the Part B deductible. Plan N covers the 20% co-insurance but excludes the Part B deductible and includes co-pays for certain services.

Social Security and Medicare Taxes
The Social Security tax rate for 2025 remains unchanged at 6.20% for employees and employers (12.40% for self-employed individuals). Similarly, the Medicare tax rate remains at 1.45% for employees and employers (2.90% for self-employed individuals).

High-income earners will continue to pay an additional 0.9% Medicare tax on incomes above $200,000 for single filers and $250,000 for married couples filing jointly.

Social Security Earnings Limits and Adjustments
The maximum earnings subject to Social Security tax will increase from $168,600 to $176,000 in 2025. There is no cap on Medicare earnings, but additional taxes apply to high earners.

To earn a Social Security quarter of coverage in 2025, individuals must make $1,810 per quarter, with 40 quarters required for full eligibility.

Cost of Living Adjustment (COLA)
Social Security benefits will see a 2.5% COLA in 2025, boosting the average retiree benefit from $1,927 to approximately $1,975. Other benefits, including survivor and disability benefits, will also increase proportionately.

Earnings Test for Early Social Security Claimants
For individuals claiming Social Security benefits before reaching full retirement age, the earnings test limit will increase to $23,400. For every $2 earned above this limit, $1 will be deducted from benefits. In the year an individual reaches full retirement age, the limit increases to $62,160, with $1 deducted for every $3 earned above the limit. Once full retirement age is reached, there is no earnings test, and beneficiaries can earn unlimited income without reductions to their Social Security benefits.

Final Thoughts
These updates to Medicare and Social Security for 2025 underline the importance of staying informed and planning ahead. Whether it’s adjusting for higher premiums, understanding deductible increases, or leveraging COLA adjustments, proactive management of your benefits can help maximize your financial security in retirement.

Consult with a Medicare or Social Security advisor to ensure you’re making the most of these programs and preparing effectively for the changes ahead.

The post Medicare and Social Security Updates for 2025: What You Need to Know appeared first on ROI TV.

Social Security

Understanding the Impact of the Repeal

Prior to this legislation, the GPO reduced Social Security spousal or survivor benefits for individuals receiving pensions from non-Social Security-covered employment. Specifically, the GPO reduced these benefits by two-thirds of the amount of the non-covered pension, often resulting in a complete elimination of the Social Security benefit for the surviving spouse.

Retroactive Benefits: A Closer Look

With the repeal of the GPO effective December 2023, individuals previously affected by this provision are now eligible for retroactive Social Security benefits dating back to January 2024. This means that surviving spouses who were denied benefits due to the GPO will receive lump-sum payments covering the period from January 2024 to the present.

FEDweek

Illustrative Scenario

Consider the following example:

• Maximum Benefit Scenario: In 2024, the maximum Social Security benefit at age 70 was approximately $5,000 per month.
• Surviving Spouse with Non-Covered Pension: A surviving spouse, whose deceased partner was eligible for the maximum benefit but had not filed before passing at age 70, would typically be entitled to the full $5,000 monthly survivor benefit.
• Impact of a Non-Covered Pension: If this surviving spouse received a non-covered pension of around $7,400 annually (approximately $616.67 per month), the GPO would have reduced their survivor benefit by two-thirds of their pension amount.
• Calculation: Two-thirds of $616.67 is about $411.11. Subtracting this from the $5,000 survivor benefit would result in a monthly benefit of $4,588.89.
• Retroactive Payment: With the GPO repeal, the surviving spouse is now entitled to the full $5,000 per month retroactively from January 2024. Over 12 months, this equates to a lump-sum payment of $60,000.

Is This Scenario Common?

While the specific circumstances described may be uncommon, they highlight the substantial financial impact the repeal can have on affected individuals. The Social Security Administration is currently evaluating the implementation process for these changes and will provide guidance to beneficiaries.

Social Security

Conclusion

The repeal of the GPO under the Social Security Fairness Act represents a significant shift in Social Security policy, offering substantial retroactive benefits to eligible individuals. Beneficiaries are advised to stay informed through official Social Security Administration communications to understand how these changes may affect their benefits.

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.

The post Unlocking Retroactive Social Security Benefits appeared first on ROI TV.

Lisa and Mike’s Starting Point

Lisa, 60, and Mike, 58, came to Joe and Alan with concerns about their retirement readiness. They had worked hard to save $400,000 in a 401(k) and $60,000 in a brokerage account. Their combined income was $106,000, and their annual expenses amounted to $70,000. Like many others, they hoped Social Security benefits of $50,000 annually would bridge the gap. With plans to retire at 67, Lisa and Mike wanted to know if they were on the right track.

Running the Numbers with EASI

Joe and Alan introduced them to the EASI Retirement System. By entering details like income, current savings, home value, and expected expenses, the tool calculated their financial trajectory. The results were sobering—the software projected that their savings would be depleted by 2043 if no changes were made. This wake-up call highlighted the need for adjustments to secure their financial future.

Adjusting the Plan: Strategies for Success

The EASI tool didn’t just highlight the problem; it also guided Lisa and Mike toward actionable solutions:

1. Boosting Savings: Increasing their savings rate from 6% to 20% of their income significantly improved their financial outlook. While challenging, this adjustment ensured more robust retirement savings.
2. Extending Work Years: By delaying retirement by a few years, Lisa and Mike could increase their Social Security benefits and add to their savings. These extra working years made a significant difference in their financial projections.
3. Tax Diversification: Joe and Alan recommended shifting some savings into Roth IRAs to reduce future tax burdens. This strategy provided more flexibility and less taxable income in retirement.
4. Optimizing Investments: Adjusting their portfolio to balance growth with preservation of capital ensured their nest egg would last longer.

Addressing Potential Challenges

Retirement planning isn’t just about numbers; it’s about preparing for the unexpected:

• Healthcare Costs: Joe and Alan reminded Lisa and Mike to account for medical expenses, which a Fidelity study estimates at $315,000 for a couple from age 65 onward.
• Market Fluctuations: Maintaining a diversified portfolio helped them weather market ups and downs without derailing their plans.
• RMDs: Required minimum distributions (RMDs) at age 73 or 75 were factored into their plan to avoid tax surprises.

Why the EASI Retirement System Works

The EASI Retirement System provided Lisa and Mike with a clear, actionable roadmap. The tool’s strength lies in its ability to:

• Assess financial readiness with easy-to-understand metrics.
• Highlight gaps in savings and income.
• Offer tailored strategies to meet individual goals.

Conclusion

Lisa and Mike’s story demonstrates how the EASI Retirement System can transform uncertainty into confidence. By increasing savings, adjusting timelines, and diversifying investments, they turned a potential shortfall into a sustainable plan. Ready to take control of your retirement? Start your journey with the EASI Retirement System today and build the future you deserve.

YMYW

Intended for educational purposes only. Opinions expressed are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Neither the information presented, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Consult your financial professional before making any investment decisions. Opinions expressed are subject to change without notice.

IMPORTANT DISCLOSURES:

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.

• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.

The post EASI Retirement System: Lisa and Mike’s Path to Financial Security appeared first on ROI TV.

1. Importance of Retirement Planning

Many individuals recognize the importance of retirement planning but struggle to feel prepared:

• Critical Disconnect: While 86% of people agree retirement planning is important, only 42% feel ready.
• Closing the Gap: Starting early and taking actionable steps can bridge the gap between importance and preparedness.

2. Retirement Savings Statistics

The statistics highlight the urgent need for improved financial planning:

• Lack of Savings: 46% of Americans have no retirement savings, underscoring the severity of the issue.
• The Big Picture: These numbers reflect a nationwide challenge that requires immediate attention.

3. Steps to Prepare for Retirement

Effective retirement planning involves three essential steps:

• Get Aboard: Begin planning and setting goals early.
• Be Aware: Understand potential obstacles like market fluctuations and plan accordingly.
• Create a Solid Plan: Develop a comprehensive strategy, including fixed income sources like Social Security, pensions, and annuities.

4. Social Security and Fixed Income

Understanding Social Security is crucial for retirement planning:

• Income Coverage: Social Security typically covers about 35% of a $50,000 income, decreasing as income increases.
• Supplemental Sources: Additional income from pensions, annuities, and investments is necessary to cover expenses.

5. Calculating Retirement Needs

Determine how much you need to save for a secure retirement:

• The 4% Rule: Multiply your income shortfall by 25 to calculate the necessary nest egg.
• Example: Covering an $89,000 shortfall in 20 years requires $2.2 million in savings.

6. Savings and Investment Strategies

Adopt smart saving and investing practices to reach your goals:

• Consistent Savings: Make saving a priority and adjust spending if necessary.
• Market Awareness: Manage investments with an eye on market fluctuations, especially as retirement approaches.

7. Medical Costs in Retirement

Medical expenses are a significant consideration:

• Projected Costs: A Fidelity study estimates $315,000 in medical expenses for a couple from age 65 onwards.
• Annual View: Break down these costs into manageable annual expenses for better planning.

8. Inflation and Purchasing Power

Inflation can erode the value of retirement savings over time:

• Future Value: A million dollars today won’t have the same purchasing power in 20 years.
• Investment Strategy: Choose investments that outpace inflation to maintain financial stability.

9. Staying Invested

Long-term investment strategies are key to retirement success:

• Market Timing Risks: Missing the best market days can drastically reduce returns.
• Diversification: Maintain a diversified portfolio to mitigate risks and optimize growth.

10. Social Security Strategies

Maximizing Social Security benefits requires careful planning:

• Delay Benefits: Waiting until age 70 can provide an 8% delayed retirement credit.
• Understand Options: Learn about distribution strategies to make informed decisions.

11. Required Minimum Distributions (RMDs)

Plan for RMDs to manage taxes in retirement:

• Start Withdrawals: RMDs begin at age 72 or 73, depending on your birth year.
• Tax Implications: Understand how RMDs impact your taxable income.

12. Flexibility and Risk in Investments

Balance flexibility and risk for sustainable retirement income:

• Risk Awareness: High-risk investments can lead to significant losses.
• Income Needs: Adjust investment strategies to align with your risk tolerance and income goals.

Conclusion

Retirement planning is a journey that requires discipline, adaptability, and informed decision-making. By starting early, staying invested, and preparing for challenges like inflation and medical costs, you can achieve your retirement goals. Share these insights with others to help them take control of their financial future.

Intended for educational purposes only. Opinions expressed are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Neither the information presented, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Consult your financial professional before making any investment decisions. Opinions expressed are subject to change without notice.

IMPORTANT DISCLOSURES:

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.

• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.

The post Essential Strategies for Effective Retirement Planning appeared first on ROI TV.

1. Cost of Living Adjustment (COLA) for 2025

The cost of living adjustment (COLA) for 2025 is set at 2.5%. This increase reflects lower inflation rates but provides a meaningful boost to Social Security benefits.

Here’s how it breaks down:

• The average retiree will see an increase of about $50 per month in their benefit checks.
• Widow or widower benefits will experience a smaller increase.
• Social Security Disability benefits will rise by approximately $40.
• For those who have maxed out their earnings for 35 years, the maximum benefit will increase by nearly $200, climbing from just over $3,800 in 2024.

Impact of COLA on Future Benefits

Even if you haven’t started taking Social Security benefits yet, you’re not missing out on the COLA adjustment. It’s applied to your primary insurance amount, ensuring your future benefits grow in line with inflation.

This annual recalculation is based on your top 35 years of indexed earnings, so your benefits will still reflect these adjustments when you eventually claim them.

2. Maximum Taxable Earnings for 2025

The maximum earnings subject to Social Security taxes will rise to $176,100 in 2025. Here’s what this means:

• Employees will pay 6.20% for Social Security and 1.45% for Medicare, with their employers matching these contributions.
• Self-employed individuals will cover both portions, totaling 12.40% for Social Security and 2.90% for Medicare.

There’s no limit on Medicare taxes, but high earners will face an additional 0.90% tax if their income exceeds $200,000 (single filers) or $250,000 (married filing jointly).

3. Taxation of Social Security Benefits

How much of your Social Security benefits are taxed depends on your provisional income. Here’s the breakdown:

For single filers:

• Below $25,000: No benefits are taxed.
• $25,000–$34,000: 50% of benefits are taxed.
• Above $34,000: 85% of benefits are taxed.

For married couples filing jointly:

• Below $32,000: No benefits are taxed.
• $32,000–$44,000: 50% of benefits are taxed.
• Above $44,000: 85% of benefits are taxed.

4. Eligibility Requirements

To qualify for Social Security or Medicare benefits, you must earn 40 quarters (10 years) of work. In 2025, you’ll earn one quarter for every $1,810 in income, meaning $7,240 of earned income gets you the full four quarters for the year.

If you don’t meet the required quarters, you may still qualify through a spouse, ex-spouse, or deceased spouse under certain conditions.

5. Social Security Earnings Test for 2025

If you’re working while claiming Social Security benefits before reaching full retirement age, the earnings test applies:

• Low earnings limit: $23,400. Benefits are reduced by $1 for every $2 earned above this limit.
• High earnings limit: $62,160. Benefits are reduced by $1 for every $3 earned above this limit.

Once you reach full retirement age, there’s no limit on earnings, and your benefits won’t be reduced.

Medicare Decisions: Your Next Steps

Approaching Medicare eligibility can be overwhelming, but you don’t have to navigate it alone. Booking a call with a Medicare guide can help you:

• Understand your options.
• Get answers to your questions.
• Make informed decisions about your Medicare coverage.

Final Thoughts

Social Security and Medicare decisions are crucial for your financial future. Staying informed about changes like these ensures you’re prepared to maximize your benefits and minimize your tax liabilities.

As always, I’m here to help. Let’s tackle these changes together so you can feel confident about your retirement plan.

The post Five Major Changes to Social Security for 2025: What You Need to Know appeared first on ROI TV.

But what if there was a way to navigate this ride with confidence—taking the stress out of investing and ensuring you stay on track to achieve your financial goals? In the latest episode of Your Money, Your Wealth®, financial experts Joe Anderson and Alan “Big Al” Clopine explore strategies that can help you overcome these emotional hurdles and build a more secure, rewarding investment strategy.

1. The Biggest Obstacle to Achieving Financial Success: You

One of the biggest obstacles to accomplishing your financial goals is yourself. When it comes to investing, many people let emotions dictate their decisions. Whether it’s fear during a market downturn or overconfidence during a market rally, emotional reactions often lead to poor financial decisions that can derail your retirement plans.

Joe and Big Al emphasize the importance of being aware of these emotional triggers and taking proactive steps to manage them. The key is to develop a strategy that allows you to stay disciplined, no matter the market conditions. By focusing on long-term goals and avoiding impulsive decisions, you can prevent emotions from steering your investments off course.

2. Investing with Confidence: A Disciplined Approach

Investing shouldn’t feel like a ride on an emotional roller coaster. Instead, it should be a methodical process driven by well-informed decisions. Joe and Big Al recommend adopting a disciplined approach to investing, which includes:

• Staying invested during market fluctuations: When the market dips, it’s natural to feel anxious. However, history has shown that staying invested over the long term typically leads to better results than pulling out during a downturn. The key is not to panic but to view these periods as opportunities to buy assets at lower prices.
• Diversifying your portfolio: One of the best ways to reduce the emotional stress of investing is to create a diversified portfolio that includes different asset classes, such as stocks, bonds, and real estate. Diversification helps smooth out the fluctuations, ensuring that one asset’s poor performance doesn’t affect your entire portfolio.
• Adopting a long-term mindset: Short-term market movements can be unpredictable, but over time, investments tend to grow. By maintaining a long-term perspective, you can avoid making hasty decisions based on temporary market conditions and ensure your portfolio stays aligned with your retirement goals.

3. Maximizing Retirement Accounts: The Power of Contributions

A key factor in achieving financial success is maximizing your contributions to retirement accounts like 401(k)s and IRAs. These accounts allow you to benefit from tax advantages, either through tax-deferred growth or tax-free withdrawals, depending on the type of account.

• Max out your 401(k) and IRA contributions: Taking full advantage of retirement accounts can significantly boost your savings over time. Joe and Big Al stress the importance of contributing the maximum allowable amount to these accounts. The more you contribute, the more you benefit from tax breaks and compound interest, which can lead to a larger nest egg when retirement comes.
• Consider catch-up contributions: If you’re over the age of 50, you can make additional “catch-up” contributions to your retirement accounts. This allows you to save more as you get closer to retirement, helping ensure you’re on track to meet your retirement income needs.

4. Managing Social Security and Tax Planning

Social Security is a crucial source of income for many retirees, but knowing how and when to claim it is key to maximizing your benefits. Joe and Big Al discuss the importance of understanding Social Security claiming strategies, especially for those planning for retirement.

• Timing your Social Security benefits: Claiming Social Security at the right time can make a big difference in the total amount you receive. Joe and Big Al explain how delaying benefits until you reach full retirement age (or even up to age 70) can result in a larger monthly benefit, providing you with more income in retirement.
• Tax planning strategies: Taxes can significantly impact your retirement income, and understanding how to manage taxes on Social Security benefits is an essential part of your overall retirement strategy. By planning ahead, you can ensure that you’re minimizing taxes and maximizing the amount of income you keep during retirement.

5. Taking the Stress Out of Investing

No matter how experienced you are with investing, it’s easy to get overwhelmed by market movements. However, Joe and Big Al argue that you don’t need to navigate the investment landscape alone. By working with a financial advisor or using proven strategies, you can simplify the process and gain more control over your financial future.

• Get informed: Educating yourself about investment strategies and understanding how different types of investments work can reduce stress and empower you to make better decisions.
• Work with experts: Financial experts like Joe and Big Al can help you design a strategy that’s aligned with your goals and risk tolerance. With decades of experience, they can provide you with the tools and knowledge to invest confidently, even during uncertain times.

6. Developing a Financial Plan You Can Trust

A well-crafted financial plan is essential for achieving your retirement goals. By developing a clear strategy for saving, investing, and withdrawing money, you can feel more secure in your financial future. Joe and Big Al emphasize that the key to financial success is not just saving money but ensuring that every financial decision you make aligns with your long-term vision.

• Create a detailed retirement plan: Start by mapping out how much money you need to save and where your money should be allocated. Consider your expected retirement expenses, potential income sources (including Social Security), and the types of investments that will help you achieve your desired lifestyle.

IMPORTANT DISCLOSURES:

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.

• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. • Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors

The post How to Tackle the Emotional Roller Coaster of Investing and Achieve Financial Success appeared first on ROI TV.

How Social Security Gets Taxed

Social Security benefits are subject to federal taxes based on your provisional income, which is a measure the IRS uses to determine whether your benefits are taxable. Unlike other income sources, only a portion of Social Security benefits may be included in your taxable income, and that portion depends on your total income level.

• Provisional Income Calculation: Provisional income includes half of your Social Security benefits, along with any gross income (such as wages, interest, and dividends) and tax-free interest from sources like municipal bonds. This calculation determines the taxability of Social Security benefits.
• Taxable Percentages: Depending on your provisional income, up to 50% or 85% of your Social Security benefits may be subject to federal income tax. These benefits, however, are not taxed at a separate rate; they are added to your regular taxable income and taxed at your marginal tax rate.

Provisional Income Calculation and Thresholds

To determine how much of your Social Security benefits may be taxed, you’ll first need to calculate your provisional income. The IRS has set thresholds that dictate whether 0%, 50%, or 85% of benefits are subject to federal tax.

1. Provisional Income for Singles:
   • If your provisional income is below $25,000, your benefits are not taxed.
   • For incomes between $25,000 and $34,000, up to 50% of your benefits are taxable.
   • For incomes over $34,000, up to 85% of your benefits may be taxed.
2. Provisional Income for Married Couples Filing Jointly:
   • If your provisional income is below $32,000, your benefits are not taxed.
   • For incomes between $32,000 and $44,000, up to 50% of benefits are taxable.
   • For incomes over $44,000, up to 85% of benefits may be taxed.

These thresholds have remained unchanged since the 1980s, which means more retirees fall into taxable brackets each year as inflation and other income sources increase.

Impact of Inflation on Provisional Income Thresholds

One of the challenges with Social Security taxation is that provisional income thresholds do not adjust for inflation. Over time, cost-of-living adjustments (COLAs) increase Social Security benefits to keep up with inflation. However, these COLAs also raise the amount of provisional income, causing more retirees to meet or exceed the taxable thresholds.

• Inflation’s Effect on Tax Brackets: As inflation pushes up benefits, many retirees see a higher portion of their Social Security subject to tax, even if their lifestyle or spending hasn’t changed. As a result, inflation indirectly raises taxes for retirees by moving them into higher provisional income brackets.
• Planning for Inflation’s Impact: To mitigate these effects, retirees may need to manage other income sources carefully, potentially reducing provisional income by controlling withdrawals from retirement accounts or using tax-advantaged strategies to keep more of their benefits tax-free.

State-Level Taxation of Social Security Benefits

While federal taxes apply to Social Security benefits based on provisional income, state-level taxation varies widely. Only 11 states tax Social Security benefits, and some of these states offer deductions or offsets to minimize the impact.

• States That Tax Social Security: The 11 states currently taxing Social Security include Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, and Vermont. However, tax rules vary within these states; for instance, some states exempt benefits for lower-income retirees or offer partial deductions.
• Understanding State-Specific Tax Laws: Retirees should become familiar with their state’s specific tax rules to make informed decisions about where they retire or how to structure their income. Many states do not tax Social Security benefits, providing a potential tax advantage that could boost overall retirement income.

Maximizing Tax Efficiency in Retirement

Understanding how Social Security is taxed—and managing provisional income thresholds—can make a significant difference in the tax efficiency of your retirement income. Strategies like controlling distributions from retirement accounts, considering Roth conversions, and choosing a tax-friendly state to retire can help you retain more of your Social Security benefits. With careful planning, retirees can maximize their income and minimize the tax bite, ensuring a financially secure retirement.

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 How Social Security Benefits Are Taxed and Ways to Maximize Tax Efficiency in Retirement appeared first on ROI TV.