It’s crucial to have a plan for your retirement, so let’s get educated. There are some facts you might not know about retirement, like the way in which your Social Security benefit can be taxed and how to factor in travel expenses.
Kiplinger’s recent article titled “5 Surprising Facts to Know About Retirement” gives us five important facts to learn about retirement.
- Your Social Security May Be Taxed. Your Social Security benefit can be taxed, up to 85%. If your provisional income as an individual is more than $34,000 or over $44,000 as a couple, the IRS says that up to 85% of your benefit is taxable. You only have to receive $25,000 in provisional income as an individual or $32,000 as a couple for 50% of your benefit to be taxed. What’s more, there are several states that impose taxes on some or all Social Security benefits including the following: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont, and West Virginia.
- No Age Limit for Contributing to a Roth IRA. You are able to contribute earned income to a Roth IRA for the rest of your life. You also never have to take required minimum distributions (RMDs) from a Roth. Note that after-tax dollars are contributed to a Roth and qualified distributions are tax-free.
- Those 65+ Can Take a Larger Tax Deduction. You don’t have to be retired to get a slightly larger standard deduction. When you turn 65, your standard deduction as an individual goes up by $1,300 and for a couple filing jointly where both members are 65 or older, it increases by $2,600 for the 2019 tax year.
- Many Don’t Include Travel Expenses. Many retirees want to travel after they stop working. However, a Merrill Lynch survey found that 66% of those 50 and older say they haven’t saved anything for a trip.
- Roughly a Third of Retirees Who Live Independently Also Live by Themselves. Older adults who live outside of a nursing home or hospital are living independently, but about 33% of these adults live alone, according to a study from the Institute on Aging. The study found that the older people get, the more likely they are to live alone. Women are also twice as likely as older men to live alone. This has financial implications, considering the high cost and likelihood of needing long-term care.
Understanding what your expenses and your income will be in retirement are the first steps in making a comprehensive plan.
Reference: Kiplinger (Nov. 11, 2019) “5 Surprising Facts to Know About Retirement”