Social Security Benefits

Your Social Security benefits are the foundation on which you can build a secure retirement. Most financial advisers say you'll need about 80% of your pre-retirement earnings to comfortably maintain your pre-retirement standard of living. If you have average earnings, your Social Security retirement benefits will replace only about 40% of your pre-retirement earnings. You'll need to supplement your benefits with a pension, savings or investments. 

Some people are required to pay taxes on their social security benefits, according to the IRS.  Generally this applies to people with many additional sources of income, like wages, self-employment, interest, dividends and other taxable income that must be reported on your tax return.  You may need to pay federal taxes of up to 85 percent on your Social Security benefits.  IRS guidelines state that if you:

• file a federal tax return as an "individual"and your combined income is:
  • between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.

  • more than $34,000, up to 85 percent of your benefits may be taxable.

• file a joint return, and you and your spouse have a combined income that is:
  • between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits

  • more than $44,000, up to 85 percent of your benefits may be taxable.

• are married and file a separate tax return, you probably will pay taxes on your benefits.

  
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Laws on this topic may vary from state to state. This content is not meant to provide you with complete information and it is not intended to be legal or tax advice. It is recommended that you consult with your own attorney, accountant or other advisor regarding your specific situation.