Ask Terry Questions Taxes on my Social Security

Taxes on my Social Security

By Terry Savage on September 02, 2013 | Financial Planning / Retirement

I am an elderly senior & know that any yr. income over $25,000. , my S. Sec.

will be taxed.

I have an IRA worth $ 160,000. of which my RMD for 2013 will be approx. $8000.

for the year.

I also have savings from the sale of my home of $150,000.

& approx. $40,000. in EE bonds.

I moved to a senior rental apartment to relieve responsibilities.

The yearly total of my income is $28,000. yr.

I am thinking that I will need a new auto & would like to have some misc.

items of which will reduce my income, hoping that I could bring it below the

$25,000. to avoid paying taxes on the Soc. future yrs.

The money isn’t earning hardly any interest, is liquid.

I realize that I would need to pay additional taxes the yr. withdrawn but should

be OK after that.

Can you give me an idea as to what amount I would need to withdraw to accomplish this thought ?

Thank you so much for sharing your wisdom.


SAVAGE SAYS: Well, I think that you are under the mistaken impression that if you take money out of your retirement accounts and SPEND it, it will reduce your income. That is not the case. First, you must pay any applicable taxes on your income, minus any legitimate deductions. You should see a tax preparer about what qualifies for a deduction, but since you no longer have real estate taxes (since your home was sold), probably your only deductions are state income taxes, which are deductible on your federal tax return. If you had huge medical expenses in one year, that could potentially be a deduction too, but it doesn’t sound like it from your post. So here are my recommendations:

1. Find a qualified tax preparer, by getting a referral from your local senior center, and show him or her your complete situation.

2. Leave your money in bank CDs — even though it is paying very little interest.

3. Do NOT cash in your Series EE bonds, because if you’ve had them for a while they are still paying a high base rate of interest.

4. After you get your tax situation clarified, and because you MUST make MRD withdrawals from your IRA, feel free to buy a new car if you need it. Don’t get ripped off!? Go to to check prices.

5. Add any excess money to your savings or CDs — chicken money!

6. Make sure you have a current will, and healthcare power of attorney — and that your family and doctor know about these documents.

Then enjoy your senior years, and be conservative with your money!? That means, don’t make any “investments” — just leave it in the bank!



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