Tags: Minimize | taxes | Social Security | retiree

U.S. News: How Retirees Can Minimize Taxes on Their Social Security Income

By    |   Monday, 09 February 2015 08:15 PM

Social Security payments represent a major portion of many retirees' income. So you want to do all that you can to keep the taxes on your Social Security income at a minimum.

Emily Brandon, senior editor for retirement at U.S. News & World Report, offers several ideas.

Keep in mind that you must pay taxes on Social Security income if the sum of your adjusted gross income, non-taxable interest income and half of your Social Security income exceeds $25,000. Depending on the total, up to 85 percent of your Social Security income may be taxable.

So obviously you want to keep your income below that trigger level. One strategy to do so is drawing down your 401(k) and IRA accounts before you start taking Social Security, Brandon notes. That money counts as income when you withdraw it.

So withdrawing it before you start receiving Social Security payments lowers your income once you do start receiving Social Security.

Meanwhile, the recent volatility in financial markets — the CBOE Volatility Index (VIX) has soared 23 percent since the S&P 500 hit its record high Dec. 29 — may have you worried about the safety of your retirement investments.

So what should you do?

"I am advising many retired clients to consider a more defensive posture in their retirement portfolio," Steven Gattuso, a senior portfolio manager at Courier Capital of Buffalo, told MarketWatch columnist Robert Powell.

"You still want to stay diversified so the adjustments that are currently recommend are tactical tweaks rather than wholesale portfolio changes."

Powell suggests that investors with an average risk tolerance and a time horizon of at least 10 years consider reducing the duration of their fixed-income portfolio. That will provide some protection against rising interest rates.

"This can be done with funds or ETFs that focus on high quality shorter maturities or even adding floating rate products to the portfolio," Gattuso said.

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Social Security payments represent a major portion of many retirees' income. So you want to do all that you can to keep the taxes on your Social Security income at a minimum.
Minimize, taxes, Social Security, retiree
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2015-15-09
Monday, 09 February 2015 08:15 PM
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