Today’s column addresses questions about whether investment withdrawals can make Social Security benefits subject to income taxes, potential options for filing when you have more than one ex and suspending a retirement benefit after it converted from a disability benefit. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc, which markets Maximize My Social Security and MaxiFi Planner.
See more Ask Larry answers here.
Have Social Security questions of your own you’d like answered? Ask Larry about Social Security here.
Will My Social Security Benefits Be Taxed Based Due To My IRA Withdrawals?
HI Larry, My only current income is money I withdraw from my IRA — I have no W-2 income now. I will not take my Social Security retirement benefit until my full retirement age. Will my Social Security benefit be taxed because I’ll continue to make IRA withdrawal? Thanks, Stan
Hi Stan, What determines whether any of your Social Security benefits are taxable is your combined annual income, which includes a) your federal adjusted gross income (AGI), plus b) your nontaxable interest income, plus c) 50% of the amount of the Social Security benefits you received.
If the total amount is more than $25,000 for an individual or more than $32,000 for a married couple, then part of the person’s Social Security benefit income would be taxable. The taxable portion of the Social Security income can vary from 50% to 85% depending on the person’s total combined income amount.
I’m not an expert on IRS regulations, but assuming that your IRA withdrawals are reported on your tax return as part of your AGI or as nontaxable interest, then that income will count when determining how much if any of your Social Security benefits are taxable. Best, Larry
Can I Draw From Either Of My Ex-Spouses’ Social Security Records?
Hi Larry, My first marriage ended in divorce after 21years. I then remarried and that marriage also ended in divorce after 14 years. Can draw a Social Security benefit from either ex’s record? Thanks, Laney
Hi Laney, Potentially, yes. You were married to each of your ex-spouse’s for more than 10 years, so you’d meet the duration of marriage requirement for divorced spousal benefits on both of their records. You’d also need to meet the other requirements for those benefits, though. Furthermore, you couldn’t draw benefits on both of your ex’s records at the same time.
Your best filing strategy depends on numerous different factors, so it sounds like you may want to consider using my company’s software — Maximize My Social Security or MaxiFi Planner — to fully analyze the options available to you in order to determine your best strategy for maximizing your benefits.
While you can’t enter both your exes simultaneously, you can run reports with each ex’s information and choose which one to file for and how to balance that with your own retirement benefit if beneficial. Also note that depending on their ages, you may even file for benefits first on one ex’s record and then on the other. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry
Can I Pay Back Or Suspend My Benefits Now To Get A Higher Benefit Later?
Hi Larry, My Social Security disability benefit converted to a retirement benefit in May. Can I pay back or suspend what is now my Social Security retirement benefit to get a higher benefit later? Thanks, Clark
Hi Clark, You can voluntarily suspend your retirement benefits in order to earn delayed retirement credits (DRC), but you can’t do so retroactively. The earliest that you can suspend your benefits is effective with the month after the month you request the voluntary suspension. So for example, if you contacted Social Security now in August to voluntarily suspend your retirement benefit, the earliest month that you could do so would be September 2021. Best, Larry
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