Estimated Fed/State income taxes on SSA pension and private pensions,as well as private pensions impact on SSA pension
I live and worked in IL. Two years ago, I turned 64, retired, and began receiving two private pensions. Wages from both employers had SSA taxes paid (listed on my paychecks). At full SSA retirement (66 and 8 months), I intend to apply for SSA pensions benefits. I read the regs and don’t believe these private pensions will reduce my SSA pension but trust your knowledge more than mine. Would you please confirm? Also, I have no idea of Fed/State income taxes that the SSA pension may incur and was hoping you may have some concrete answers.
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Terry Says
As long as those were not pensions from public services jobs (ie teaching, city or county govt, etc) then those sources of income won’t impact your Social Security. But may I suggest that if you can afford to wait, you take SS at age 70. For every year you wait beyond full retirement age, you get another 8% in your base benefit — upon which future cost of living increases will be paid. It’s worth the wait, ifyou can live on other sources of income.
Second, you should withhold at least 20% from each SS payment. In fact, I’d visit with an accountant to see if you should withhold more (depending on any withholding from your pensions), so that you don’t face an estimated tax penalty. You could either file quarterly estimated taxes, or increase the withholding from your SS check to make sure you have your tax obligation covered.