Massachusetts Social Security Recipients to Receive Largest Cost-of-Living Increase in Decades
According to statistics, Social Security benefits are not taxed in 38 of the 50 states, providing a much-needed reprieve for people who are considering retirement. I think it’s a GOOD thing that seniors with lower and moderate incomes are exempt from paying any taxes.
However, if your income is above a particular threshold, you can get a deduction on the federal half; this deduction, however, is not excessive. It all relies on how much money you made in the working world in the past.
Would you prefer to forgo paying any taxes on your Social Security benefits? If so, take into account your location since we have some GOOD news for you if you reside in the immediate, three-state area.
Two of the 38 states Massachusetts and New York will not impose any additional taxes, which is good news for beneficiaries. Included in the mix is neighboring New Hampshire, which has no state income tax.
However, two states in our area WILL tax your Social Security benefits.
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Tax-Advantaged Retirement Savings Options
Although Connecticut and Vermont are NOT covered by this benefit, we expect that they will be on the list of the 2 additional states that eventually join this venture.
Some beneficiaries receive a break from the Green Mountain state, but you should research this before moving up north.
The following options can also help you reduce your tax liability: Deciding to retire in a state with low taxes isn’t the only way to reduce your retirement tax liability.
Consider making contributions to tax-advantaged accounts during your working years if you want to benefit from the tax advantages without paying any taxes up front.
A Roth IRA OR Roth 401(k) is an excellent choice to invest in because your retirement withdrawals won’t be taxed, even though you won’t pay less in taxes in the year you contribute.
The alternative is to make significant payments to assist protect your future benefits from taxes, in which case this income won’t be counted against you for Social Security purposes.
If you have a high-deductible health plan, you might also want to think about opening a health savings account (HSA), as the money in an HSA rolls over from year to year if you don’t use it, and withdrawals are never taxed if they go toward an eligible medical bill.
On withdrawals from non-Roth retirement accounts, regular income taxes will be imposed.
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Source: WSBS
