The focus of this segment is to understand that the IRS can tax your social security but only if you let them.
We asked Charlie Jewett from Renovating Retirement about this topic and here is what he had to say.
“Social Security already feels like a kind of tax, coming out of every one of your paychecks or for us self employed people as part of that self employment tax right? Well when you look at your tax return, most people still in their working years miss the two different boxes that says ‘social security payments’ and ‘taxable social security’. Of course we see them all the time working with retirees, and here’s the kicker….they are able to tax up to 85% of your social security!!! And the way they do that is if your taking non-earned or provisional income, basically if your taking money from IRA’s, 401k’s, etc the IRS will tax up to 85% of your SS income!”
We asked if it was too late for viewers who are close to or in retirement already.
We also asked if he suggested we convert the entire account to a Roth IRA and pay taxes on all of it in one year.
Charlie: “There are ways to do what is known as a Roth conversion, and basically ‘divorce’ the IRS for those who put a lot of money into 401k’s, IRS’s, etc. Its going to be different for every situation, but we embrace whats called ‘Zero Percent Planning’, meaning we plan to get you as close to being in the 0 percent tax bracket as possible. If the IRS doubles taxes, whats 60% times zero ? ZERO !
Start with building your financial blueprint at https://renovatemyplan.com.