Today's Money Story Here's the thing most people miss: the IRS doesn't just look at your Social Security income to decide if it's taxable. They look at your 'combined income' — that's your adjusted gross income, plus any tax-exempt interest (yes, even your municipal bond income counts), plus half of your Social Security benefit. If that combined number tops $25,000 for singles or $32,000 for married couples, a portion of your benefit becomes taxable. Cross $34,000 single / $44,000 married? Now up to 85% is on the table for Uncle Sam. Here's where retirees get blindsided: a Required Minimum Distribution. You turn 73, you're forced to pull money out of your IRA, and suddenly your combined income shoots up — dragging your Social Security into taxable territory for the first time. Nobody warned you. Nobody planned for it. And now your tax bill looks like a ransom note. The fix? It's called a Roth conversion strategy. By converting chunks of your traditional IRA to a Roth in the years before RMDs kick in, you shrink those future forced withdrawals — and potentially keep more of your Social Security tax-free. Takeaway: Run your combined income number NOW, before you file. If you're close to those thresholds, a quick chat with a tax pro before April 15th could save you real money this year. |