Jan-Feb2020

Retirement Prep Is Your Client’s Social Security Taxable? By Jamie Hopkins, Director of Retirement Research, Carson Wealth Management WE CAN SEPARATE RETIREMENT income planning into two sections: saving and spending. First, investors need to save and accumulate wealth over a long period of time in order to have the retirement assets they need to maintain a certain lifestyle. Second, a retirement portfolio needs to provide a certain amount of income each year for an uncertain period of time. It’s this uncertainty of how long someone will need a consistent retirement income that’s one of the biggest challenges in helping clients plan for retirement. Fixed-income products, like bonds and CDs, add diversification to a retirement income portfolio and help protect against a large market downturn. Fixed-income becomes even more important during retirement because fixed-income investments, like CDs, bonds and annuities, can help preserve, grow and distribute wealth. What they lack is the ability to provide a steady income for life. The single most important fixed-income source that can provide income for life is Social Security. Social Security is the bedrock of the United States’ retirement income system. For roughly one-third of all retirees, Social Security is almost all of their income. For two-thirds of retirees, Social Security represents more than 50 percent of their retirement income. Maximizing our clients’ Social Security benefits will help enhance their retirement security. The conversation about max- imizing Social Security benefits is often about the best time to claim benefits. To understand how Social Security works and how we can help our clients maximize benefits, we need to understand the tax implications of Social Security benefits. Social Security covers most working Americans and is funded through a payroll tax. Today, employers and employees each pay 6.2 percent of wages up to the tax- able wage base of $132,900 ($137,700 in 2020). This is an underappreciated employer benefit as many employers pay more into Social Security each year than they do into Jamie Hopkins 6 REVERSE MORTGAGE / JANUARY-FEBRUARY 2020