
1. Social Security retirement benefits may be taxed.
Many retirees depend on Social Security for a big chunk of their retirement income. However, this income may be reduced by taxes.
On the federal level, retirees may have to pay taxes on up to 85 percent of their Social Security benefits if they have significant income from other sources.
If combined income is between $25,000 and $34,000 when filing as an individual, or between $32,000 and $44,000 when filing jointly, 50 percent of Social Security benefits may be taxed.
If combined income is more than $34,000 when filing as an individual, or more than $44,000 when filing jointly, up to 85 percent of Social Security benefits may be taxed.
This means that it is important to consider how wages, dividends and other income sources will impact a retiree’s annual income. (Thresholds are subject to change; see the Social Security Benefits Planner for more information on calculating combined income.
It’s also important to consider state taxes. Some states tax Social Security benefits, but others do not. As a result, where you live can make a big difference in how much of your benefits you actually get to pocket.