The cost of labor and how to maximize your Social Security

Many people are surprised to learn that Social Security payments can be taxable. In fact, depending on your Modified Adjusted Gross Income (MAGI), you may be taxed on up to 85% of your benefits. Once you reach retirement age, your Social Security benefits are taxed based on your filing status and how much other income you receive. If you file singly and your provisional income is below $25,000 annually, you will not pay taxes on your Social Security benefits.  (Provisional income includes gross income, tax-free interest, and 50% of Social Security benefits.) A single filer whose provisional income is between $25,000 and $34,000 will be taxed on up to 50%. Single filers whose provisional income is more than $34,000 are taxed on up to 85% of their benefits. The numbers increase for people who file jointly, with those whose provisional income remains under $32,000 avoiding taxes on Social Security, couples earning a provisional income of between $32,000 and $44,000 taxed on up to 50% and those earning over $44,000 in provisional income taxed on up to 85%. Some states also tax Social Security benefits, although they are exempt from state taxes in Wisconsin and 36 other states. Knowing the difference between qualified and non-qualified money is the key to making the most out of the money you’re earned. Qualified money includes assets you have accumulated but not paid income taxes on yet, for instance, IRA and 401(k) money.  Because you won’t have to pay taxes on these assets until you withdraw them, the government requires you to begin doing so when you reach 70 ½. These are called required minimum distributions and you must take them every year or you will be penalized. Additionally, these distributions adjust your provisional income higher, which makes more of your Social Security taxable. That’s one reason to increase the amount of non-qualified assets you have in your portfolio as you get closer to retirement…. | Read More »

Finding a labor of love

In some ways, a healthy retirement relies on the proper choice of preposition. You want to retire to something – a passion or hobby – rather than from something. Want to retire so you can spend more time with your grandchildren? Great. Can’t wait to retire so you can stop working at a job you find uninspiring? Okay, but then what? Rising life expectancies and opportunities for good health have produced a generation of octogenarians who crave activities and may need some additional resources to fund them. That’s why we often recommend that the best retirements sometimes include work. We certainly condone leaving a job you no longer enjoy if you have the financial resources to do so, but, if you have no other plans, consider part-time work in a related field. Work as a consultant, tutor, freelance writer, receptionist or cashier. The wages you earn will help you avoid dipping into your retirement funds, which will give them a better opportunity to grow. Even if you’re very confident you have set yourself up financially for a successful retirement, you still might crave the opportunity to feel useful. In that case, volunteer as a coach, mentor, docent or usher. The idea is to stay active and productive. Give yourself a reason to leave your house, challenge your brain to keep it sharp and allow yourself opportunities for social connections. If you love your job and enjoy your co-workers don’t retire just because your birthdate says you can. Social Security calculates your monthly payment based on your 35 highest wage earning years. Most people earn much higher wages in their later years of employment than they did in their early years. So, the more years you work earning the higher wages, the more lower-wage years you will replace. This will boost your monthly Social Security payment (up to the highest Social Security benefit amount you can receive , which is $2,788… | Read More »