Latest news with #JaimeEckels
CNBC
30-05-2025
- Business
- CNBC
59% of working Americans fear Social Security will dry up—here's how to plan ahead
Millions of older Americans rely on Social Security to make ends meet. Their younger counterparts aren't confident they'll be able to do the same. Among nonretired Americans, 59% are worried that Social Security won't be available by the time they stop working, according to a recent survey from DepositAccounts. The program drying up would be a huge problem for millions of Americans. Currently, Social Security payments make up more than half the income for 40% of retirees, according to the Social Security Administration. The issue for the next generation of retirees is that the coffers are running low. At the current rate, unless Congress intervenes, the trust fund for retirees will be exhausted by 2033, at which point the government will only be able to pay out 79% of the scheduled benefits. "It's not that far away. We're creeping up on it," says Jaime Eckels, a CFP and partner at Plante Moran Wealth Management. "It's something that's on people's minds now more than it's ever been." Notably, a reduction in benefits is a far cry from payments drying up altogether. For many retirement savers, though, it's not hard to imagine a world where a once ubiquitous program goes by the wayside. After all, how many young people do you know with a pension? But if you're worried about receiving diminished benefits, it's possible to plan ahead. Here's how experts say to prepare. If you've ever received a paycheck, you likely have an idea of how Social Security works. Workers pay Social Security taxes, typically via payroll deduction, on earnings up to a certain amount — $176,100 for 2025. If you're under the threshold, you and your employer split the cost, each paying in 6.2% of your income. That money goes into a trust fund from which the government pays out benefits to retirees, as well as their survivors and people with qualifying disabilities. When you retire, the amount of your payout depends on how much you made during your career and when you claim the benefits. Generally, the benefit is designed to replace around 40% of your pre-retirement income. If you think there's a possibility that the program might go away, start by seeing what your financial plan would look like without it. "Most of the time, we'll run our retirement projections with a reduction in Social Security anywhere between 50% and 100%," says Doug Boneparth, a certified financial planner and founder of Bone Fide Wealth. Eckels goes through the same exercise with her clients. "If there's a concern, which for many young people there is, then let's figure out a way in which we can plan around not having Social Security," she says. It may make sense for you to work with a financial advisor of your own, who could walk you through these sorts of simulations. But for some back-of-the napkin math, you can plug your current savings, monthly contributions and expected returns into an investing calculator, like this one from the Securities and Exchange Commission. Once you determine how much you'll have at the time of your retirement, divide by 25. An old rule of thumb dictates that you can safely withdraw around 4% of your retirement portfolio annually (assuming a certain investment mix) for 30 years without running out of money. Would that be enough for you to live on? If you're decades away from retirement, it can be tricky to tell, says Eckels. "Your income, your job, your life could change in a million different ways between now and retirement," she says. Nevertheless, if the number you see falls short of what you may be envisioning, it's up to you to get yourself on track, financial pros say. And the earlier you start, the better. "When you're younger, you can potentially account for that," says Eckels. "You can save more. You can be more aggressive when it comes to how much you're putting away for retirement." For those closer to retirement age, it may be wise to consider adding other sources of income for when you leave your 9-to-5, such as picking up consulting work or investing in income-producing rental properties. And if you plan this way and Social Security comes in as expected, you can consider it a bonus. But thinking about your future without it "further emphasizes the need to take control of your own financial destiny," says Boneparth. "Retirement has been placed on the individual more than ever before." ,
Yahoo
04-03-2025
- Business
- Yahoo
Millions of Americans may get a Social Security boost. And maybe a tax bill.
Millions of Americans will receive a little extra Social Security money soon, but advisers warn it may also mean a little extra taxes. The Social Security Fairness Act eliminates the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO), which reduce Social Security benefits for about 3.2 million public-sector retirees who also receive pension income. The law's effective date is retroactive to January 2024, so beneficiaries may get a one-time retroactive payment that could amount to thousands of dollars and higher monthly benefits starting this year. "Some people's benefits will increase very little while others may be eligible for over $1,000 more each month," the Social Security Administration said in January. That's a lot of money to spend, but for some, it can also be enough of an income boost to trigger more taxes, experts said. 'The good news is, this isn't urgent, and people have time to prepare,' said Jaime Eckels, certified financial planner and Wealth Management Partner with Plante Moran Financial Advisors. People have about a year before the tax man cometh. 'They may be taxed, but not until 2025 taxes' because income is recorded when cash is received, said Mark Kohler, certified public accountant and author of several tax and small business guides, who is based in Irvine, California. 'You should have gotten (the money) last year but didn't get it until now, so it's reflected on the SSA-1099 for 2025,' he said. The SSA sends people form SSA-1099, or a Social Security Benefit Statement, detailing the amount of benefits you received in a tax year. How much of people's Social Security benefits will get taxed depends on the total amount of their income, including tax-exempt interest like from a municipal bond, plus one-half of their Social Security benefits for the taxable year. Up to 85% of your Social Security benefits can be taxed depending on how much more that combined income is over than the base amount for your filing status. The base amounts based on filing status are: $25,000 if you're single, head of household, or qualifying surviving spouse $25,000 if you're married filing separately and lived apart from your spouse for the entire year $32,000 if you're married filing jointly $0 if you're married filing separately and lived with your spouse at any time during the tax year. If you're married and file a joint return, you and your spouse must combine your incomes and Social Security benefits when figuring the taxable portion of your benefits. Even if your spouse didn't receive any benefits, you must add your spouse's income to yours when figuring on a joint return if any of your benefits are taxable. SSA provides a tool to help calculate whether Social Security benefits are taxable and if so, how much. Aside from the higher share of taxable Social Security benefits, beneficiaries will also have to watch their overall income tax bracket, Eckels said. 'The payments could also push individuals into a higher tax bracket or IRMMA bracket, affecting Medicare premiums,' she said. IRMAA stands for Income-Related Monthly Adjustment Amount, which is a surcharge added to Medicare Part B and Part D premiums for people with higher incomes. People have a few options they can try to avoid more taxes. They include, experts say: If the lump-sum retroactive payment pushes your combined income above the thresholds for the tax on Social Security, the IRS will allow you to allocate it to the year you should have received it, Eckles said. You don't have to "amend" your prior year's tax returns either. Instead, you check the box on line 6c of your Form 1040 or 1040-SR if it lowers the taxable portion of your benefits and pay any taxes owed for the prior year with your current year's tax return. Consider making qualified charitable distributions (QCDs) from your IRAs if you're subject to required minimum distributions (RMD). 'QCDs used to offset your RMDs are an above-the-line deduction that will reduce modified adjusted gross income,' or MAGI, Eckles said. MAGI is also used to determine Medicare Part B and D premiums, she noted. Reduce withdrawals from retirement accounts since you've got higher Social Security payments and/or harvest tax losses in brokerage accounts to manage taxable income. Invest your retroactive Social Security check into your own small business, Kohler said. 'There's no effective or sustainable and wise tax deduction to offset your Social Security payment,' he said. Not only can you generate more income for yourself and your next of kin, but 'a small business allows you to take more effective tax write-offs.' What about that trip you've always wanted to take to Tahiti? That's not completely off the table, Kohler said. In that case, he said, use some, not all, of the money to 'go get that itch scratched.' He suggested carving out 20-25% of the money for fun, a new tv or travel and 25% to pay down high-interest debt if you have it. Divide the rest of it between a Roth IRA and a new idea or business that will pay you in the future. People deposit after-tax money into Roth IRAs, but withdrawals are tax free and not subject to RMDs. Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@ and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday. This article originally appeared on USA TODAY: Many Americans may get a Social Security boost. And maybe a tax bill.
USA Today
04-03-2025
- Business
- USA Today
Millions of Americans may get a Social Security boost. And maybe a tax bill.
Millions of Americans may get a Social Security boost. And maybe a tax bill. Show Caption Hide Caption Here's how Social Security was created in the U.S. Social Security benefits get talked about a lot in the U.S. but have you wondered how the benefits work and if they are taxable? Here's a breakdown. Just Curious Millions of Americans will receive a little extra Social Security money soon, but advisers warn it may also mean a little extra taxes. The Social Security Fairness Act eliminates the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO), which reduce Social Security benefits for about 3.2 million public-sector retirees who also receive pension income. The law's effective date is retroactive to January 2024, so beneficiaries may get a one-time retroactive payment that could amount to thousands of dollars and higher monthly benefits starting this year. "Some people's benefits will increase very little while others may be eligible for over $1,000 more each month," the Social Security Administration said in January. That's a lot of money to spend, but for some, it can also be enough of an income boost to trigger more taxes, experts said. 'The good news is, this isn't urgent, and people have time to prepare,' said Jaime Eckels, certified financial planner and Wealth Management Partner with Plante Moran Financial Advisors. When do people have to pay the taxes? People have about a year before the tax man cometh. 'They may be taxed, but not until 2025 taxes' because income is recorded when cash is received, said Mark Kohler, certified public accountant and author of several tax and small business guides, who is based in Irvine, California. 'You should have gotten (the money) last year but didn't get it until now, so it's reflected on the SSA-1099 for 2025,' he said. The SSA sends people form SSA-1099, or a Social Security Benefit Statement, detailing the amount of benefits you received in a tax year. How much tax might people have to pay? How much of people's Social Security benefits will get taxed depends on the total amount of their income, including tax-exempt interest like from a municipal bond, plus one-half of their Social Security benefits for the taxable year. Up to 85% of your Social Security benefits can be taxed depending on how much more that combined income is over than the base amount for your filing status. The base amounts based on filing status are: $25,000 if you're single, head of household, or qualifying surviving spouse $25,000 if you're married filing separately and lived apart from your spouse for the entire year $32,000 if you're married filing jointly $0 if you're married filing separately and lived with your spouse at any time during the tax year. If you're married and file a joint return, you and your spouse must combine your incomes and Social Security benefits when figuring the taxable portion of your benefits. Even if your spouse didn't receive any benefits, you must add your spouse's income to yours when figuring on a joint return if any of your benefits are taxable. SSA provides a tool to help calculate whether Social Security benefits are taxable and if so, how much. Aside from the higher share of taxable Social Security benefits, beneficiaries will also have to watch their overall income tax bracket, Eckels said. 'The payments could also push individuals into a higher tax bracket or IRMMA bracket, affecting Medicare premiums,' she said. IRMAA stands for Income-Related Monthly Adjustment Amount, which is a surcharge added to Medicare Part B and Part D premiums for people with higher incomes. What can people do to reduce taxes from the Social Security bump? People have a few options they can try to avoid more taxes. They include, experts say: If the lump-sum retroactive payment pushes your combined income above the thresholds for the tax on Social Security, the IRS will allow you to allocate it to the year you should have received it, Eckles said. You don't have to "amend" your prior year's tax returns either. Instead, you check the box on line 6c of your Form 1040 or 1040-SR if it lowers the taxable portion of your benefits and pay any taxes owed for the prior year with your current year's tax return. Consider making qualified charitable distributions (QCDs) from your IRAs if you're subject to required minimum distributions (RMD). 'QCDs used to offset your RMDs are an above-the-line deduction that will reduce modified adjusted gross income,' or MAGI, Eckles said. MAGI is also used to determine Medicare Part B and D premiums, she noted. Reduce withdrawals from retirement accounts since you've got higher Social Security payments and/or harvest tax losses in brokerage accounts to manage taxable income. Invest your retroactive Social Security check into your own small business, Kohler said. 'There's no effective or sustainable and wise tax deduction to offset your Social Security payment,' he said. Not only can you generate more income for yourself and your next of kin, but 'a small business allows you to take more effective tax write-offs.' What about that trip you've always wanted to take to Tahiti? That's not completely off the table, Kohler said. In that case, he said, use some, not all, of the money to 'go get that itch scratched.' He suggested carving out 20-25% of the money for fun, a new tv or travel and 25% to pay down high-interest debt if you have it. Divide the rest of it between a Roth IRA and a new idea or business that will pay you in the future. People deposit after-tax money into Roth IRAs, but withdrawals are tax free and not subject to RMDs. Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@ and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.
