From next year social security benefits will go up but along with increasing benefits, it could end up putting a burden on senior citizens. And now it’s confirmed, the experts have been discussing seniors on Social Security for months being on the edge of a huge rise in the coming year. The Social Security Administration had already declared this week that the recipients will be receiving a raise of 5.9 percent as a cost-of-living adjustment which is the highest rise to come over the last 10 years.
Is There Any Possibility That the Raise Can Prove to Be Bad for Some Seniors?
In comparison with this, only 1.3 percent COLA was sent to seniors this year and therefore, an increase by 5.9 percent will accelerate the purchasing power of all the beneficiaries to a great extent.
But while an excellent raise on Social Security benefits is, of course, a good step, there is also another side of the scenario where it could turn out to be bad and for that possibility, seniors are required to prepare themselves.
Will a giant raise can make you pay taxes on your benefits?
Very often, seniors are surprised to get to know that the Social Security income applies to taxes. But whether seniors are liable to pay taxes on the benefits solely depends upon the number of income seniors earn.
Rates of Taxes that a senior can be liable to pay on a certain income bracket
The taxes on Social Security depends upon the provisional income of seniors which is the total of non-Social Security + 50 percent of an individual’s yearly benefits. But individuals with a provisional income between the range of $25,000 and $34,000 can be liable to pay taxes on up to 50 percent of benefits and those with a provisional income of more than $34,000 can be liable to pay taxes on up to 85 percent of their benefits.
The ceiling limits are different for married couples
These ceiling limits are a bit higher for the married couples receiving Social Security and, in such cases, couples having a provisional income below $32,000 can make up for their benefits in full.
But those with a provisional income of $32,000 to $44,000 will be liable to pay taxes on up to 50 percent of benefits and if the provisional income falls beyond $44,000 then the liability of paying taxes will be on up to 85 percent of benefits.
Here’s how COLA will be coming into effect from the next year, seniors who are currently at the edge of being liable to taxes on Social Security benefits could notice the rise in their benefits to the extent where their provisional income cross the above limits and the consequence will be hitting to pay taxes for the first time on benefits.
Escaping Taxes on Social Security Benefits
One of the most distressing things about taxes on Social Security benefits is that the limits on income mentioned above have not been modified over the past ten years despite that the cost of living has seen a significant rise substantially. And also present seniors may not be capable of doing much to lessen their provisional income, the future recipients can look for any way out so that they can escape from paying taxes on their Social Security benefits.
Probably the most effective way to do the same is to make savings in Roth IRA for retirement. The withdrawals from Roth IRA do not apply to taxes and also doesn’t count as provisional income and provided that Social Security itself not paying all of that kindly, the average amount collected by a senior currently is $1559 monthly approximately, it’s convenient to escape away from paying taxes when the withdrawals from a retirement plan aren’t taxable.
Taking into consideration how the cost of living has increased in the past months, it’s compelling that the seniors on social security have been given an opportunity to cope up and an increment of 5.9 percent will certainly help them in achieving that aim. Just be informed that the raised benefits could result in unexpected tax payments.
The bonus of $17,166 Social Security overlooked by most retirees completely
If you’re similar to most Americans, you are a few years away from your retirement savings. But plenty of less-known “Social Security Secrets” can help in assuring the raise in your retirement income. For instance: one easy plan could pay you as much as $17,166 or even more than that annually, so once you understand how to optimize your Social Security benefits you can get relaxed.
- 1 Is There Any Possibility That the Raise Can Prove to Be Bad for Some Seniors?
- 2 Will a giant raise can make you pay taxes on your benefits?
- 3 Rates of Taxes that a senior can be liable to pay on a certain income bracket
- 4 The ceiling limits are different for married couples
- 5 Escaping Taxes on Social Security Benefits
- 6 The bonus of $17,166 Social Security overlooked by most retirees completely