The unfortunate news is that some of you will have to pay federal income taxes on your Social Security benefits.

This usually happens only if you have other substantial income in addition to your benefits (such as wages, pensions, self-employment, interest, dividends and other taxable income that must be reported on your tax return).

For purposes of determining how the Internal Revenue Service treats your Social Security payments, “income” means your adjusted gross income plus nontaxable interest income plus half of your Social Security benefits.

If your total income is more than $25,000 for an individual or $32,000 for a married couple filing jointly, you must pay income taxes on your Social Security benefits. Below those thresholds, your benefits are not taxed. That applies to spousal, survivor and disability benefits as well as retirement benefits.

The portion of your benefits subject to taxation varies with income level. You’ll be taxed on:

• up to 50 percent of your benefits if your income is $25,000 to $34,000 for an individual or $32,000 to $44,000 for a married couple filing jointly.

• up to 85 percent of your benefits if your income is more than $34,000 (individual) or $44,000 (couple).

Say you file individually, have $50,000 in income and get $1,500 a month from Social Security. You would pay taxes on 85 percent of your $18,000 in annual benefits, or $15,300. Nobody pays taxes on more than 85 percent of their Social Security benefits, no matter their income.

All of the above concerns federal taxes; 13 states also tax Social Security to varying degrees. If you live in Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, North Dakota, Vermont, Utah or West Virginia, contact your state tax agency for details on how benefits are taxed.

Keep in mind:

• If your child receives Social Security dependent or survivor benefits, those payments do not count toward your taxable income. That money is taxable if the child has sufficient income (from Social Security and other sources) to have to file a return in his or her own name.

• Supplemental Security Income (SSI) is never taxable.

• If you do have to pay taxes on your benefits, you have a choice as to how: You can file quarterly estimated tax returns with the IRS or ask Social Security to withhold federal taxes from your benefit payment.

In the ever-changing landscape of healthcare insurance, we noticed a question that has come up for a couple of our clients that we thought might pertain to some of you as well.

What are my Medicare options even if I am still working after age 65 and have coverage through my work?

• Do I Need to Enroll in Medicare If I’m Still Working? By Maurie Backman - https://www.fool.com/retirement/2017/05/25/do-i-need-to-enroll-in-medicare-if-im- still-workin.aspx\

• "Medicare When Working Beyond 65" by Patricia Barry -https://www.aarp.org/health/medicare-insurance/info-03-2011/ask-ms-medicare- question-94.html

In addition to reading these articles, we highly suggest that you discuss your situation with your own personal healthcare insurance agent or if you do not have one then call our own in-house health insurance expert, Mark Post, who we know would be happy to help.

A few years ago, on the heels of the financial crisis of 2008-2009, I had the pleasure of attending a conference where renowned financial author, Nick Murray, was speaking. 

I still remember the core of his message: he was concerned that, due to the scars of the huge stock market meltdown, many investors were going to become solely focused on safety of principal and, in doing so, completely and regrettably forget about the risk of inflation. 

In short, he was witnessing people, in the interest of feeling better temporarily, moving all of their money into 1, 2 or 3% CDs (or even burying it in the backyard) and vowing never to go back into the markets again—all the while forgetting that if inflation went back up to 3-4% (as we know it historically often does), their real return would then become negative.

So, while we have been in an unprecedented period of very tame inflation, we always want to make sure that our clients understand the risk that comes with over-allocating to so-called “no risk” assets. 

Of course, there is no substitute for secured deposits for funds that are going to be needed for near-term and sometimes even mid-term expenses. 

But for longer-term funds, a well-designed investment portfolio will go a long way to offset the erosion of purchasing power that inflation can cause.  And with life expectancies on the rise, the need to at least keep up with inflation becomes an even more important factor to consider as we do our planning.

Up next:  Timing risk

1.) Check your liquid reserves. Setting one to two years of living expenses aside in true cash instruments allows you more confidence in letting your long-term portfolio do what it’s going to do.

2.) Look at your allocation plan.Look at how your portfolio is allocated across cash and bonds and stocks. Being well diversified will be the main determinant of how your portfolio behaves.

3.) Consider your withdrawal strategy.A turbulent market is a good time to consider your withdrawal strategy and what you are spending money on. There could be areas to pull back your spending during tough markets.

4.) Mind the small stuff.Take a look at all of your investment related expenses, mind your transaction costs, and if you’re paying commissions to trade, don’t trade more than you need to.

Learn more at: http://bit.ly/4RetireeToDos (Source Morningstar.com)

1. Wait for Social Security. If you can afford to, wait until you're 70. For every year you wait after age 62, your benefits increase by about 8%.

2. Do a budget, hire a financial planner, get a retirement plan. Once you have found an advisor you trust, they will have you do a budget, and get you and your spouse to sit and discuss your shared vision for retirement.

3. Do not retire without a plan. Don’t retire without knowing what you will be doing for the rest of your life. Even those who thought they would love to play golf every day often get bored within six months.

4. It’s never too late to start saving. Most of us have not saved enough and must adjust our way of thinking about retirement. The longer you work, this helps you build savings and keeps you from drawing down the savings you do have.

5. Don’t be afraid of the stock market. Besides people not saving for retirement, one of the biggest mistakes clients make could be being too conservative with their investments. The impact can be huge over a lifetime of saving.

Read more at: http://usat.ly/1LZLeiR (Source USAToday.com)