A game plan for financial stability and reducing taxes
- 65-year-old working full time with Social Security and pension
- Debts of $38,500 and $8,000 owed to IRS
- Looking for a game plan to get back on track
- Social Security earnings limit and penalties
- Paying taxes on Social Security benefits
- Building retirement savings to reduce future tax bill
- Consider suspending Social Security benefits
- Paying down debt strategically
- Building emergency fund and saving for retirement
- Taking an “all-of-the-above” approach
Dear Tax Guy, I am 65 years old and receive a pension and Social Security. I work full time. I have been penalized for the last two years because I went over the limit on earnings for Social Security as I was making around $50,000 each year. Next year, at 66 and 8 months, I can earn as much as I want and not be penalized by Social Security. I have debts, including a $30,000 car loan, a $2,500 credit-card bill, and a $6,000 personal loan. I also owe $8,000 to the Internal Revenue Service, and I pay back $250 a month. Once I pay off the debt, how can I be prepared for taxes? Or even reduce them? I am fairly healthy, and plan to work for another 10 years. I need a game plan.
– Social Security earnings limit and penalties: Until reaching full retirement age, $1 is deducted from benefit payments for every $2 earned over the limit.
– Paying taxes on Social Security benefits: Recipients pay federal income taxes on up to 85% of benefits if combined income exceeds $34,000 per year.
– Building retirement savings to reduce future tax bill: Utilize retirement accounts offered through work, such as a 401(k), to reduce taxable income and save more.
– Consider suspending Social Security benefits: If not needed while working, suspending benefits until age 70 can result in a more generous benefit and lower tax bill.
– Paying down debt strategically: Focus on debts with the highest interest rates first, while making minimum payments on the rest.
– Building emergency fund and saving for retirement: Aim to have a six-month emergency fund and continue saving for retirement.
– Taking an “all-of-the-above” approach: Depending on individual circumstances, consider pursuing multiple strategies simultaneously.
Remember, it’s important to assess your own financial situation and make decisions based on your specific needs and goals. Seek professional advice if needed.
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Key People:
Factuality Level: 7
Justification: The article provides information about Social Security earnings limits and how they affect benefits. It also discusses the tax implications of earning income while receiving Social Security benefits. The article offers suggestions for reducing taxes and paying down debt. While the information provided is generally accurate, it lacks specific details and examples to support the advice given.
Noise Level: 3
Justification: The article provides relevant information and advice for someone who is nearing retirement age and wants to reduce their tax bill and prepare for the future. It discusses the earnings limit for Social Security, paying taxes on Social Security benefits, and strategies for reducing debt and saving for retirement. The article stays on topic and provides actionable insights for the reader.
Financial Relevance: Yes
Financial Markets Impacted: No
Presence of Extreme Event: No
Nature of Extreme Event: No
Impact Rating of the Extreme Event: No
Justification: This article pertains to financial topics as it discusses taxes, Social Security, retirement savings, and debt repayment strategies. However, there is no mention of any extreme events or events that impact financial markets or companies.
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