Get the scoop on how 2023’s Social Security bump might hit retirees’ taxes in 2024, and pick up some savvy tips to tackle these changes.
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Here Comes the Taxman: What Retirees Need to Know in 2024
Hey there, folks! If you enjoy your golden years, let us sit down for this.
As we march into the 2024 tax season, many retirees are about to get a little surprise in their mailbox – and not the fun kind.
Thanks to the whopping 8.7% cost-of-living adjustment (COLA) in 2023 – the biggest bump in over 40 years – some of your Social Security dough might now be on Uncle Sam’s radar.
That is right, we are talking taxes on what you pocket from Social Security.
The COLA Conundrum
So, here is the lowdown: that sweet little COLA increase we all cheered about? It has got a small quantity of sting in its tail.
It nudged many of you past the point where the government starts eyeing your Social Security benefits for taxes.
Mary Johnson, a whiz at The Senior Citizens League, warns that this tax bill could sneak up on some folks.
When Your Income Says ‘Hello’ to Taxes
Now, let us talk numbers.
If you are hitched and raking in over $32,000 a year, you might have to start sharing a slice of your Social Security pie with the IRS.
Johnson thinks many retirees will feel this pinch for the first time this tax season.
Inflation is Still a Thorn
All right, inflation has backed off from its scary peak in 2022, but wait to pop the champagne.
Life is still pricey, especially when discussing keeping a roof over your head and the lights on.
These bills are taking bigger bites out of retirement budgets.
Medicare Costs – The Silent Budget Eater
Moreover, here is another kicker – Medicare costs.
They are creeping up this year, but many of us are so busy watching our Social Security checks grow that we miss these sneaky hikes.
Ryan Haiss, a hotshot financial planner, says this is a blind spot for many.
Tax Time for Social Security Checks
Did you know nearly half the folks getting Social Security might have to cough up some of it in taxes?
Yup, up to 85% of your benefits could be taxable depending on how much you make.
Haiss says this is a biggie to consider when you are planning your retirement budget.
Those Pesky Income Thresholds
Get this – the income limits that decide if your Social Security benefits get taxed have not been touched since 1984.
Anqi Chen from the Center for Retirement Research points out that this old-school rule means more retirees will owe taxes over time.
RMDs: The Tipping Point
And then there is this thing called Required Minimum Distributions (RMDs) from retirement accounts.
Combine that with your other income, and bingo, you might hit the tax jackpot. It is a common snag as folks get older.
A Rising Tide of Tax Bills
A study by the Senior Citizens League found that about one in four older taxpayers had to pay taxes on their Social Security for the first time in 2022.
Moreover, that club is probably getting more members with the big COLA last year.
Get Ready, Get Set, Plan!
So, what can you do?
First, give the IRS’s tax calculator a whirl to see where you stand.
Moreover, do not forget about the cash you make from your savings and investments – Uncle Sam’s interested in that, too. Haiss advises keeping a close eye on any interest income.
Bracing for the Tax Wave
The 2024 tax season is shaping up to be a rollercoaster for retirees, with the COLA increase playing a major role.
The name of the game?
Stay sharp and plan smart to keep those tax surprises at bay.