3 Best Ways to Minimize Taxes on Social Security

Here are the three best ways to minimize taxes on Social Security. If this video is helpful and you want to learn more about optimizing your Social Security, check out my new podcast, Your Money Guide on the Side, by clicking the link in my bio.

1. Strategic Withdrawals from Retirement Accounts

Withdraw from your retirement accounts strategically. Most people don’t know that withdrawals from traditional IRAs and 401(k)s count towards the income that determines if your Social Security is taxed. By withdrawing more in lower income years before you claim benefits or spreading out withdrawals over time, you can significantly reduce your tax liability.

2. Convert to a Roth IRA

Consider converting some of your traditional IRA or 401(k) to a Roth IRA before you claim benefits. Roth withdrawals are 100% tax-free and do not increase your taxable income. By converting, you can lower your taxable income and, thus, pay less tax on your benefits—essentially equivalent to free money. And last I checked, we all like free money.

3. Avoid the Stealth Tax Trap

Finally, don’t fall into the stealth tax trap by investing in municipal bonds (munis) thinking that interest doesn’t count towards your income. Why does it count? I have no idea, but the IRS says it does.

If you want to join the 50,000 readers who are already getting smarter with their money, sign up for my free newsletter by clicking the link in my bio, and I'll send over more insights like this every Sunday morning.

Source