Did the Tax Cuts and Jobs Act Eliminate the Social Security Tax Torpedo?

Joe Elsasser, CFP®, President of Covisum
December 22, 2017

The Tax Cuts and Jobs Act represents a relatively significant tax cut for most middle-income retirees, but the bill did nothing to change the interactions between different income sources in retirement, which means that retirees will need to pay close attention to which accounts they withdraw from at which points in time.

A case study: old vs. new 

To illustrate the interactions between ordinary income, such as IRA withdrawals, Social Security benefits, and long-term capital gains, Joe contributed this article to Financial Advisor, "Tax Cuts Eliminate Social Security Tax Torpedo, Retirement Income Juggling Act."

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Clients often don’t understand the relationship between ordinary and capital incomes, leading to potentially significant tax inefficiency in their retirement strategy. With all of the chatter about tax in the news, clients are even more confused. With Tax Clarity, you can provide tax alpha and quickly identify sub-optimal situations, showing clients how to make retirement decisions in the most tax-efficient way. Additionally, when you subscribe to the software you get an entire support team to help you answer client and software questions.

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Posted by Joe Elsasser, CFP®, President of Covisum
Joe developed Social Security Timing® in 2010 because, as a practicing financial advisor, he couldn’t find a Social Security tool that would help his clients make the best decision about when to elect their benefits. Inspired by the success of Social Security Timing, Joe founded Covisum®, a financial tech company focused on creating a shared vision throughout the financial planning process. In 2016, Covisum introduced Tax Clarity®, which helps financial advisors show their clients the hidden effective marginal income tax rates that can significantly impact cash flow in retirement. In early 2017, Covisum acquired SmartRisk™, software that allows advisors to model “what-if” scenarios with account positions and align a client’s risk tolerance with their portfolio risk. In January of 2019, Covisum launched Income InSight®, an income planning tool that deeply integrates with Covisum's other tools and helps advisors make better financial decisions, faster while resolving conflicts in assumptions and conflicts in results that plague other financial planning tools.