When planning for retirement, many seniors believe, falsely, that their Social Security benefits are completely free from taxation. However, that is only a partial truth since a law passed in the early 1980’s subjected up to %85 of benefits to taxes if the modified adjusted gross income of the recipient, with differing amounts for married couples, crosses a certain threshold. When the law was passed, the $25,000 MAGI for an individual only lead to 1-10 beneficiaries paying taxes. But that amount was not designed to be adjusted over time even though inflation and other factors slowly increased the number of retirees subject to the tax. As it currently stands, nearly half of seniors are paying an impost on their benefits with the number expected to cross %50 within the next ten years. Since there has been little action taken by Congress to address this situation it would be wise to take the additional expense into account when planning for retirement. The extra outflow of money could amount to thousands of dollars per year and cause much hardship and heartache for those who are unprepared.
See Sean Williams, Care to Guess How Many Seniors Could Be Taxed on Their Social Security Benefits by 2030?, My San Antonio, April 10, 2016.
