Outdated Social Security Rules Affecting Seniors’ Retirement Income

Today, 90% of seniors rely on Social Security to provide them with expenses for their retirement. There is a big concern, however, that not enough people are entering the workforce to cover the new payroll tax revenue.

The biggest issue concerning the system for the past 33 years is the taxation of Social Security benefits based on income thresholds. In 1983, Congress passed an amendment allowing Social Security benefits to be taxed up to 50% for those with an annual income of more than $25,000. This amendment was relative at the time but has since lost reasonableness due to unchanged tax income thresholds.

One way seniors can solve this problem and be proactive in their retirement planning is by having a withdrawal plan. This plan allows seniors to strategize how they will receive their distributions ahead of time, which could avoid bumping them into the higher tax bracket and ultimately save them money.

See Sean Williams, This 33-Year-Old Social Security Rule Is Wreaking Havoc on Seniors’ Retirement Income, The Motley Fool, May 8, 2016.