How To Get Your Social Security Benefits 100% Tax-free In Retirement(it is possible!)

(If you want to check out the video instead, click here)

Love it or hate it, social security is the best inflation-protected income source on the planet when it comes to retirement planning.

There really isn’t a better way to generate income that is hedged against inflation, than with your monthly social security check, but often retirees can’t, or don’t want to live off social security alone.

Which makes total sense.

Retirement is your opportunity to travel, spoil the grandkids, go sailing, and sip margaritas on the beach at 9am without a care in the world, right?!

To do all of that it typically takes more income than social security can provide.

I’ve talked about other retirement assets in other blogs and videos, and will certainly discuss those more in the future, but I want to talk about how to maximize your retirement income by minimizing the tax bill on your social security check!

And the goal is to completely eliminate your tax liability (meaning you don’t pay a dollar of taxes on your social security benefits).

This requires a little bit of strategy with your retirement income planning, and some possible repositioning of some retirement assets, but in the end, it can really help you generate more income for yourself in retirement (and who doesn’t want that!?)

So, social security is taxed based on your “provisional income” (more on what that means in just a moment)

Currently, if you’re married, and your provisional income is between $32,000 and $44,000, 50% of your social security will be taxed at “ordinary income rates”.

If your income happens to exceed $44,000 then 85% of your social security will now be subject to ordinary income tax (which we would like to avoid if possible).

That means that if you can keep your provisional income below $32,000 in retirement, you can collect your social security check 100% tax-free!

Your provisional income is calculated by taking your AGI (adjusted gross income) + tax-exempt interest (from bonds & other savings vehicles) + 50% of your social security benefit itself (this one doesn’t make sense to me but that’s how it is).

So, all you must do is ensure that you keep your AGI and the interest you are earning on other investments low in retirement and you won’t trigger your social security income being taxed.

How to do this can be a little more complex, depending on your specific situation, but here’s the short, abbreviated version of how to do this:

· Offset the income from your taxable retirement assets (401k’s, IRA’s, 403b’s, pensions, etc.) with your standard deduction (making all this money tax-free, and NOT triggering the social security tax either)

· Reposition any taxable retirement assets exceeding $350,000 into accounts that have no tax liability in retirement (this is a way to generate unlimited income in retirement, with NO tax liability!)

· Ensure that any other interest or income you are earning outside of retirement money doesn’t push your “provisional income” above the $32,000 provisional income threshold (if it does, you can need to start reallocating those dollars somewhere to prevent the social security tax from being triggered).

These strategies are outlined in even greater detail in a wonderful book titled, “tax-free income for life” by David McKnight, which I highly recommend everyone read.

If reading about taxes, social security, and retirement planning isn’t your thing, we can just chat 1-on-1 instead.

This is what I help people with on a daily basis 😊