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The thresholds for taxing benefits have not been adjusted for inflation over the years, leading to an increase in the percentage of retirees who pay taxes on their benefits. To help reduce the tax impact on Social Security benefits, you can consider several strategies:
📌 Convert traditional IRAs to a Roth IRA: You can withdraw funds tax-free and avoid increasing taxes on benefits. It's advisable to convert gradually to stay within your current tax bracket.
📌 Contribute money from your IRA to charity: Qualified charitable distributions (QCDs) allow you to donate directly from your IRA to a qualified charity, reducing your adjusted gross income.
📌 Delay claiming Social Security benefits: While delaying Social Security benefits may increase the amount of benefits included in your provisional income, it can lower taxes on your overall retirement income.
📌 Make your taxable portfolio tax-efficient: Opt for tax-efficient investments in your taxable portfolio, such as growth-oriented stocks or stock funds that generate less taxable income.
Minimizing your Social Security tax burden begins with a proactive tax strategy. What are you waiting for?