Page 38 - April 2022 Issue.indd

Don’t Be Surprised by The amount of taxes you may need
to pay will also depend on when
Social Security Taxes you start taking Social Security. Th e

earlier you take benefits, the smaller
Submitted by Ann Jacobs, Financial Advisor,
your monthly checks, and the smaller
Edward Jones - Denton 410-479-0271
the taxes. But taxes should not be a
key issue in deciding when you need
more than $34,000, up to 85 percent of to begin collecting your payments.
When you reach the appropriate age,

your benefits may be taxable. Rather, you should consider other
it’s easy to apply for Social Security
factors, such as your anticipated life

retirement benefits – just go to Social If you’re married and fi le jointly…If expectancy, your employment situ-
Security’s website, fill out the online you and your spouse have a combined ation, your spending needs and the

form and you’re essentially done. But income between $32,000 and $44,000, benefits for your spouse.

many people overlook the next step – you may be taxed on up to 50 percent
completing Form W-4V, which asks of your benefits. If your combined Here’s something else to keep in
you how much federal income tax income is more than $44,000, up to mind: Because Social Security taxes
you want withheld from your benefi ts. 85 percent of your benefits may be are based on your overall income,
And if you skip this step, you could taxable. as described above, the amount of
face an unpleasant surprise when it’s money you withdraw during retire-

tax-filing time, because Social Secu- These numbers might seem high, but ment, and where that money comes

rity benefits can indeed add to your they don’t mean you’ll lose 50 percent, from, can also affect your tax situa-

taxable income. or 85 percent, of your benefits – they tion. For example, withdrawals from

are just the percentages of benefits a traditional IRA are taxable and will
Here are the details: you may be taxed on, at your personal increase your adjusted gross income,
income tax rate. but withdrawals from a Roth IRA will
If you’re a single filer…If your
“combined” income is between $25,000 To help avoid a big tax bill or an be tax-free, provided you’ve had your

and $34,000, you may have to pay underpayment penalty, you can file account at least five years and you’re
income tax on up to 50 percent of your Form W-4V with the Social Security over 59 -1/2, so this money won’t enter
Social Security benefi ts. (“Combined” Administration and request to have 7, into your taxable income calculations
income includes your adjusted gross 10, 12 or 22 percent of your monthly and it won’t increase the tax you owe
income, non-taxable interest, and one- benefit withheld. Your tax advisor on your Social Security benefi ts. Simi-
half of your annual Social Security can help you choose the withholding larly, withdrawals from health savings

benefits.) If your combined income is percentage that’s appropriate for your accounts (HSAs) used for qualified
situation. health expenses also won’t count
toward your taxable income.

By knowing exactly what to expect
from Social Security, including the tax
effects, you can more eff ectively incor-

porate your benefits into your overall

retirement income planning – and the
better your plans, the more you’ll be
able to enjoy your life as a retiree.

This article was written by Edward Jones for

use by your local Edward Jones Financial
Advisor. Edward Jones, Member SIPC.

Ann M Jacobs
Financial Advisor edwardjones.com
Member SIPC
105 Franklin St
Denton, MD 21629-1207
410-479-0271

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