Chances are good Social Security benefits will be very important to you when you retire. Obviously, you need to know how much income these benefits will bring so you can realistically estimate whether you’re ready to leave the working world and fend for yourself without earning a wage.
Unfortunately, millions of retirees across America are at risk of losing some of the benefits they expect to receive. This is why.
If you live in one of these states, you may lose some of your benefits
Retirees risk losing some of their Social Security checks if they live in one of the 13 states that levy state taxes on these benefits. The 13 states that Social Security tax revenues include:
- New Mexico
- North Dakota
- Rhode Island
- West Virginia
Now if you live in one of these locations, it’s not necessarily a given that you will always lose some of your retirement benefits to your local government because of tax rules. That’s because many states don’t start taxing Social Security funds until retirees hit a certain income threshold. Usually, it is the upper middle class and the wealthy who find themselves losing some of their retirement money in taxes, while lower-income retirees don’t worry about it.
Still, there’s a chance you could see some of your state benefits if you live in one of these 13 locations. And if you want to make sure this doesn’t happen, it’s a good idea to visit your state’s Department of Revenue so you can find out exactly what the rules are for taxing benefits.
If it turns out you’re losing some of your Social Security funds, consider whether a move in retirement might be worth it — especially if your state has other unfavorable tax policies that affect the income you’ll have as a senior. If you have a steady income, every dollar counts, and losing some of your retirement checks to taxes can be a big blow that you just can’t afford.
And if you’re considering moving, before you decide to move, you should look at the big picture of how all of your sources of income are taxed in states you move to — not just Social Security. Some states have no income tax at all, while others have more favorable rules for retirement income. You need to know what your total tax bill will be.
The bottom line is that tax planning is a critical part of making a decision about where to retire. And it’s best to do this research early as you make decisions about your financial future.
That’s especially true if you probably don’t have enough income — especially if the government takes some of it. Responding quickly can save your nest egg, and a step to cut your state taxes can make all the difference in how far your Social Security checks go to provide you with a comfortable future in your later years.