In last week’s blog, we mentioned that you can go to www.ssa.gov/myaccount to discover your expected benefits when you retire. When you start receiving those benefits, you may be unpleasantly surprised that the dollars you are receiving are less than you expected. There are two basic reasons for this difference.
Medicare premiums
The Social Security Administration will deduct the cost of your Medicare premium from your monthly Social Security check. The current base premium is $121.80 per month. However, if your income is greater than $85,000 for single folks or $170,000 for those who are married, your premium will be higher, from $48 to $268 higher per month.
Talking to your tax professional for tax planning before retirement can help you manage your income to lessen the impact of an increased Medicare premium.
Federal Income Tax withholding
If you expect some of your Social Security benefits to be subject to income tax, you can request that federal income taxes be withheld from the monthly benefit. You can make this request when you apply for benefits.
If you are already receiving benefits and want to have income tax withheld or you want to change the amount being withheld, complete IRS form W-4V, Voluntary Withholding Request. You can have 7%, 10%, 15%, or 25% of your benefit withheld for federal income taxes.
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Judith Ackland has more than 26 years of experience in accountancy and financial planning, including seventeen years as a CFO of a diverse business. She started Crystal Financial in 2010 to help a wide array of individuals, families, and business owners better understand their finances and how good financial management could help them achieve their goals. Judith has an MA in Professional Accountancy from the University of Nebraska at Lincoln as well as a Certified Public Accountant Certificate and a Certified Financial Planner designation.
