Hidden Value: Beware the Social Security Tax Torpedo

Lauren Laferla, PR & Content Marketing Manager
October 3, 2018

Think Advisor

Hidden Value is a new column in ThinkAdvisor where Joe Elsasser, CFP®, answers common questions with insights advisors and their clients may not have considered. This week he discusses avoiding the tax torpedo and how combinations of different retirement incomes can create ugly distortions in tax rates. 

Here's an excerpt:

"Social Security income by itself is not taxable. It only becomes taxable when other income causes the total “provisional income” to exceed certain thresholds. It’s a multi-step process that can be calculated using the IRS worksheet. This structure creates what’s known as a “tax torpedo” or a “snowball effect.”

Retirees who use funds from their brokerage accounts or even cash savings for living expenses often pay no federal income tax at all. They’re thrilled, but really, they may be setting themselves up for a big tax impact when their required minimum distributions begin.

Read the article in its entirety here

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Posted by Lauren Laferla, PR & Content Marketing Manager
Lauren is a content marketing enthusiast with a love for storytelling - on camera, in writing, and through others. She has a robust communications background that includes: public relations, content creation, internal communications, digital marketing, and copy editing. Driven and motivated, Lauren holds a bachelor's degree in English and is an avid reader.