Listener Q&A: Social Security, RMDs & Annuities

Check out Jeremy’s latest podcast on retirement planning by listening on “Apple Podcasts” or “Spotify Podcasts” or read below for my answers to Your Questions About Social Security, RMDs & Annuities.

Summary:

[174] – We’ve recently received a bunch of questions from our listeners and today Jeremy answers the first batch! 

In this episode, Jeremy Keil answers your questions about Social Security, required minimum distributions, and annuities. He talks about how income levels affect social security taxes and the importance of tax planning. Jeremy explains the calculation of RMDs, the benefits of qualified charitable distributions, and Roth conversions. He also compares multiyear guarantee annuities to CDs, highlighting the potential for higher interest rates and the need to understand the role of guaranteed income in retirement.

Jeremy discusses:

• Social Security taxation and its complexities
• How required minimum distributions (RMDs) work and the challenges in managing them
• Qualified charitable distributions (QCDs) and potential benefits of Roth conversions
• Considerations for evaluating annuities as part of retirement planning
• Maximizing Social Security benefits
• And more

Answering Your Questions About Social Security, RMDs & Annuities

Social Security is a vital component of retirement income for many individuals, but understanding how it is taxed can be a confusing process. In this blog post, we will delve into the intricacies of Social Security taxation, explore the thresholds that determine tax rates, and shed light on the complexities of Required Minimum Distributions (RMDs).

How is Social Security Taxed?

Social Security taxation is not a one-size-fits-all scenario. The taxation of Social Security benefits depends on your combined income, a term that takes into account all sources of income, including half of your Social Security benefits.

• Zero Taxed: If your combined income falls below a certain threshold, your Social Security benefits remain untaxed.
• 50% Taxable: Once your combined income surpasses another benchmark, 50% of your Social Security benefits may become taxable.
• 85% Taxable: If your combined income exceeds a higher threshold, up to 85% of your Social Security benefits may be subject to taxation.

For married couples filing jointly, these thresholds are important. The transition points from 0% to 50% taxation and from 50% to 85% taxation occur at combined incomes of $32,000 and $44,000, respectively.

How much can I earn while on Social Security?

To determine the taxable portion of your Social Security benefits, you need to calculate your combined income. This involves adding up all non-Social Security income and half of your Social Security income. An example can illustrate this better:

• Suppose you have $30,000 from a pension and $20,000 from Social Security. Combining these, along with half of your Social Security income ($10,000), brings your combined income to $40,000.
• With a threshold of $32,000 for 50% taxation, the excess $8,000 results in $4,000 of Social Security becoming taxable.

How do RMDs work?

The complexities of Social Security taxation become even more apparent when you introduce RMDs. RMDs are mandatory withdrawals from retirement accounts that can impact the taxation of your Social Security benefits.

• If you add a $20,000 RMD to the previous example, your combined income now becomes $60,000.
• This exceeds the $44,000 threshold for 85% taxation.
• Despite the formula suggesting $19,600 in taxable Social Security, the maximum taxable amount is capped at 85%, resulting in a total of $17,000.

Understanding Social Security taxation and the interaction with RMDs is crucial for retirees. The complex calculations involved require careful consideration. As regulations and age requirements change, staying informed about these aspects is essential for effective retirement planning. Seeking advice from financial professionals can help navigate this intricate landscape and optimize your retirement income strategy.

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To learn more about Social Security, RMDs & Annuities, check out the resources below!

If you have any questions, feel free to contact us using the contact information provided below!

Resources:

• SSA.gov: Income Taxes and Your Social Security Benefit
• IRS.gov: Retirement Topics – Required Minimum Distributions (RMDs)
• IRAHelp.com: 2022 Uniform Lifetime Table
• Free Retirement Planning Video Course: 5stepretirementplan.com
• 3 Things You Should Know Before Choosing A Financial Advisor
• 7 Questions That Could Make or Break Your Retirement
• Subscribe to Retirement Revealed on Google Podcasts
• Subscribe to Retirement Revealed on Apple Podcasts

Connect With Jeremy Keil:

• Keil Financial Partners
• LinkedIn: Jeremy Keil
• Facebook: Jeremy Keil
• LinkedIn: Keil Financial Partners
• YouTube: Retirement Revealed
• Book an Intro Call with Jeremy’s Team

Disclosures:

Content

Results and figures presented within the above links are hypothetical, unaudited and are intended for illustrative purposes only.

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No Tax Advice

Keil Financial Partners does not provide any tax advice. No information or results from the links should be interpreted as tax advice. Please seek guidance from a qualified tax professional for any and all tax-related matters.

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The content and information provided through the links should not be interpreted as being investment advice or a recommendation of suitability for any particular security, portfolio of securities, transaction, or investment strategy, or related decision. Please seek assistance from a qualified investment professional for any and all investment matters.

Investment Risk

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General Disclosure

Advisory Persons of Thrivent provide advisory services under a “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser. Keil Financial Partners and Thrivent Advisor Network, LLC are not affiliated companies. Please visit our website www.keilfp.com for important disclosures.