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I should have mentioned that im full retirement age 66 and im still working until September at which time ill have earned approx., 50,000. so if I add the 27,000 to the 50,000 that will put me at 77,000. maybe I should have my employer deduct an extra 100 dollars a week from my pay in federal taxes to help offset anything I might owe?
You'll probably have to pay tax on 85% of your SS this year. Depending upon how much non-SS income you have in the year(s) after you retire, you may or may not have to pay federal tax on your SS. I have a pretty good pension, so I will always pay tax on SS but maybe not on the entire 85% (I haven't calculated it). This year, I will pay on my SS because I will work for 1/4 of the year as well as receive 3/4 of my pension plus I'll get an early retirement lump sum.
I'd rather pay the taxes and have a comfortable retirement than the opposite.
I should have mentioned that im full retirement age 66 and im still working until September at which time ill have earned approx., 50,000. so if I add the 27,000 to the 50,000 that will put me at 77,000. maybe I should have my employer deduct an extra 100 dollars a week from my pay in federal taxes to help offset anything I might owe?
As mentioned already, use TaxCaster (free) or similar to estimate your tax bill for the year. If needed, ask for more $$ to be withheld from your paycheck... that's simpler than making quarterly estimated payments.
I should have mentioned that im full retirement age 66 and im still working until September at which time ill have earned approx., 50,000. so if I add the 27,000 to the 50,000 that will put me at 77,000. maybe I should have my employer deduct an extra 100 dollars a week from my pay in federal taxes to help offset anything I might owe?
You won't add the whole $27K. The amount of SS benefits that you add to other income is based on a sliding scale from 0% to 85%, depending on the amount of other income. The IRS has a worksheet on page 16 of https://www.irs.gov/pub/irs-pdf/p915.pdf that is what you need to use to arrive at the amount you add to other income.
Using that amount, along with other information, you could then use the IRS on-line Withholding Calculator at https://www.irs.gov/Individuals/IRS-...ing-Calculator to determine what adjustments you need to make to a W-4, or have SSA withhold some amount from your benefit payment.
You won't add the whole $27K. The amount of SS benefits that you add to other income is based on a sliding scale from 0% to 85%, depending on the amount of other income. The IRS has a worksheet on page 16 of https://www.irs.gov/pub/irs-pdf/p915.pdf that is what you need to use to arrive at the amount you add to other income.
Using that amount, along with other information, you could then use the IRS on-line Withholding Calculator at https://www.irs.gov/Individuals/IRS-...ing-Calculator to determine what adjustments you need to make to a W-4, or have SSA withhold some amount from your benefit payment.
I was always under the impression that SS benefits are only taxed at high incomes. In the IRS link it references base amounts for a couple for additional income outside of SS at only $32,000. Is that true? That means any outside income, pensions IRA withdraws etc , totaling over $32,000 will kick in a tax on SS?
Sorry if this is a dumb question, I've honestly never looked into this before.
yes , the taxes on ss really do start quite low . it can be more of a problem for those with lower incomes who are right at the borderline take an extra thousand bucks out of an ira and you can lose 48% of ii to taxes if you go over the limit
Last edited by mathjak107; 02-19-2016 at 12:35 PM..
Well this is certainly bad news. And it only reinforces the idea to take SS later so you won't set yourself up for a tax bill by having other income to cover the shortage of your early SS check.
not really . In this case you would have rmd's and a bigger ss check perhaps making it even more painful . each case will be different . what we will spend down delaying ss won't make a dent in our rmd's
The Infamous Tax Torpedoe. There are all kinds of online calculators that illustrate the issue. If you want to live on any amount near your SS plus $27k, plus or minus, the consequences of withdrawing form tax deferred to add to taxable income are monstrous. You really want to be well below or well above those numbers, or literally most all your savings goes right to the IRS. Its a senselessly stupid inflexible set of rules. Unfortunately, most people don't find out about it until they start getting RMDs and half of that amount is suddenly due in taxes, and there is literally very little recourse.
And in the category of another dumb question...is there any strategy to diminish this problem just before you take SS or need RMDs? For example, the year you are 69 could you take a pile of money out of your IRA to hold you over for the 'extra' you would need for the next few years?
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