Announcer:
It’s time now on KROS for Financial Focus, brought to you by NelsonCorp Wealth Management. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representatives securities offered through Cambridge Investment Research. Inc. a dealer member, FINRA, SIPC, investment advisor, representative Cambridge Investment Research Advisors. Inc. A registered investment advisor, Cambridge and NelsonCorp Wealth Management, are not affiliated. Cambridge does not offer tax advice. Now here’s today’s financial focus program.
Nate Kreinbrink:
Good morning and welcome to this week’s Financial Focus brought to you each and every Wednesday morning right here on KROS. This is Nate Kreinbrink bringing you today’s show. Hard to believe, we are middle of February. Although if you’ve been looking outside and being outside over the last, I would say four or five days, definitely doesn’t feel like mid-February, but I think everyone’s in agreement that we will take this as long as it wants to stick around because it’s been definitely pleasantly nice to see people outside, windows open. Saw a few golf courses had opened up over the weekend. And Monday, Tuesday, and taking advantage of some of these unseasonably warm mid-February weather that we’ve been receiving.
So definitely been nice. Although you look a little extended forecast, it does come back down a little closer to what the normal average would be. Again, although not completely terrible. And obviously anybody that’s lived in the area for any amount of time over this time period, we know it’s definitely not over. But every day that we get through February into March, March and April, spring, warmer temperatures, see spring training on the TV, a lot of kind of those spring activities definitely starting. So again, enjoy it, take advantage of it. Definitely good to get out, get some sunshine, some fresh air and go with it from there with no snow on the ground.
So getting into today’s program, I know the third Wednesday of every month usually is a tax day. Usually Andy Ferguson or Mike Van Zooten would join me. They were both kind of booked up with some appointments earlier this morning. So we’ll kind of talk a little bit the very first part on some taxes with the topic I’m going to cover today, but then transition into maybe a little more explanation on it.
And that is a topic that continues to have questions with when we meet with people that come up that we get calls for and having to do with Social Security. The one thing I will say from a tax standpoint, from a tax season standpoint, I guess even specifically, is that if you have not received your 1099 or if you maybe have misplaced your 1099 from your Social Security benefit that you were getting, you can create an account or log into your Social Security count online. Usually through ssa.gov, you create your login.gov account. You are able to access a copy of your 1099 from your individual login site. You can print that off and then have it. I think that’s going to be a lot smoother and definitely a lot quicker than trying to call the Social Security Administration and trying to get that resend out to you.
So again, if you lost it, which again happens, it gets misplaced, you’re not anticipating it being in the envelope that it comes in and you just don’t have it. Or if you just never have it. You can log in, create your account through there, go in print off your 1099 copy of that. But one thing to keep in mind that that login is individual to a person. So if you are married, each spouse will need to create their own individual login to access their own individual 1099s.
So you can’t log in for one and get both of them from that. It has to be individual with that. So again, questions on that, you can go through there. The other question, again, still has to do with the tax on Social Security and maybe some of the misconceptions with maybe what they thought was going to be part of this new tax law.
And Andy and I have talked about it kind of a lot of over the last few months since it’s been coming out. And as we transition into the new year, the no tax on Social Security that was part of the new tax bill that went into effect this past July 4th, doesn’t necessarily have to do with Social Security. What it does is it’s called a senior deduction, and anybody that is 65 or older with income of 150,000 or less will get an additional $6,000 deduction on their tax return.
Again, that is per person. So if you’re married and both of you fall into that category, you will each get an additional 6,000 on your tax return as a deduction. And again, that is in addition to the standard deduction that you already get. Again, you have to meet those criteria. If you’re 63 and you’re on Social Security, you’re not going to get it.
If you’re 67 and still not taking Social Security, you may still possibly be able to get it. So again, it is in place to offset any tax on Social Security, but to qualify for that deduction doesn’t necessarily have anything to do with whether or not you have or have not filed for Social Security yet. So again, keep that in mind as you go in.
But again, when you look at Social Security in general, Social Security benefits by themselves are never taxable, okay? They become taxable when your income starts going up above certain levels. And so every dollar that your income goes up once you hit those levels, is going to bring another dollar of Social Security to become taxable. Until you get to the max of 85% of your Social Security benefit would be subject to tax. And again, that’s not being taxed at 85%. 85% of your benefit would be subject to tax at whatever tax level you are at.
So again, when people say that, well, I didn’t need to get my Social Security tax, well a lot of people weren’t even paying Social Security tax anyways. So the deduction would still be applied to it if they qualify and if they have taxable income for it to be applied to. So again, keep that in mind as you’re looking at it. But again, as we look at Social Security benefit, this could be a whole month show as far as the intricacies of it and the different situations, the different strategies, the pros, the cons outweighing them.
But at the end of the day, when we look at Social Security benefit, just understand that it’s not a one-size-fits-all kind of suggestion for people at to what age they take it. We say this with a lot of slight to what with Social Security, it’s no different is that it needs to be an individual situation.
Your situation versus a co-worker versus a relative versus a neighbor is completely different. When you start looking at a Social Security benefit for you and if you’re married a spouse, it needs to be taken into consideration how it fits into the bigger picture. When you look at Social Security benefit and the income that it does provide, that is one piece of the puzzle when you start looking at the overall plan of how you are going to fund your retirement.
So again, when you look at it from that way, the other adage that I always say is that when you retire and when you file for your Social Security benefit, need to be two separate decisions. Just because you retire is not a good reason to turn on your Social Security benefit.
Now, as I say as well, there’s instances where people retire and the next day they’re turning on their Social Security benefit. That made sense for them. That may not make sense for other individuals where there’s maybe some planning opportunities that we can take advantage of by delaying Social security a year or two or three or we getting to 65, we getting to full retirement age, or the max that you can delay it to is age 70.
But there’s reasons why you would want to do that. And a lot of times it’s because you may have additional taxable income, additional tax-deferred accounts that we may have some opportunities to be able to get money out of those accounts, have it become taxed at lower rates and not worry about having to add that Social security income. So those other accounts that you have, your tax-deferred 401(k)s, IRA accounts, 403 Bs, things like that, that we know we have to get it taxed at some point whenever we take it out, maybe helps us bridge the gap to be able to delay that Social Security for just a short time period or to one of those milestone ages that we continue to go over with that.
So again, there’s a lot that goes into it, and again, I just plead with people to again, sit down with somebody, understand what all your options are. Before you make that decision, just understanding taking it now versus deferring it a little while, what is that going to change? Am I able to do that? Because again, the longer you defer it, the bigger that benefit is going to be.
And again, the question that I always ask people is, you tell me how long that you’re going to live, how long a spouse may live, and I’ll tell you exactly when you should take it to maximize that benefit. So obviously nobody gives me that right answer to that question when you’re looking at it, but it shows you kind of the uncertainty that we are choosing when to take this Social Security for an uncertain amount of time.
So again, from that standpoint, we need to make sure that we understand what our options are. Again, if you’re married, we want to look at coordinating those benefits. Again, should the unfortunate happen and a spouse passes away, that surviving spouse does not get two benefits. The bigger benefit is the one that’s going to continue. The smaller benefit essentially goes away. So whichever spouse has the bigger benefit, that gives us a little bit different planning as we want to kind of protect that benefit a little bit more. So that way, again, that surviving spouse is going to have that bigger benefit continue.
So again, when you look at it, have some questions, have some answers. But again, understand what your options are. Maybe next week when I come on, we’ll talk a little bit more about how your benefit is factored, what they look at to determine the amount that you are going to get when you do decide to file spousal benefits, survivor benefits and things like that, how those are factored in.
So again, a lot of questions that go along with it, but again, a very key… and for a lot of people, it’s one of the largest assets that they will make decision on throughout their retirement. So again, we want to make sure that we get it right, that it’s coordinated with every other benefit that we have, and we feel confident that we made the right decision.
So give us a call. I’d be happy to sit down with you. Do want to mention here before I run out of time that every month, Nelson Corp Wealth Management is featuring a charity of the month. For February, we are focusing on the Clinton Women’s Club here in Clinton. Again, this is Nate Kreinbrink with Nelson Corp Wealth Management, bringing you this week’s financial focus. Thanks for tuning in and have a great rest of your week.
Announcer:
Financial Focus is a production of NelsonCorp Wealth Management in Clinton and Davenport. The opinions voiced in the show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered Representative Securities offered through Cambridge Investment Research Incorporated, a broker dealer member FINRA SIPC. Investment advisor representative, Cambridge Investment Research Advisors Incorporated, a registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. For more information, visit our website at www.nelsoncorp.com.