PT  - JOURNAL ARTICLE
AU  - William Reichenstein
AU  - William Meyer
TI  - Practical Applications of How Social Security Coordination Can Add Value to a Tax-Efficient Withdrawal Strategy
AID  - 10.3905/pa.2022.pa508
DP  - 2022 Aug 10
TA  - Practical Applications
PG  - pa.2022.pa508
4099  - https://pm-research.com/content/early/2022/08/06/pa.2022.pa508.short
4100  - https://pm-research.com/content/early/2022/08/06/pa.2022.pa508.full
AB  - The spike in marginal tax rates associated with the taxation of up to 85% of an individual’s Social Security benefit is termed the “tax torpedo.” In How Social Security Coordination Can Add Value to a Tax-Efficient Withdrawal Strategy, from the Fall 2021 issue of The Journal of Retirement, William Reichenstein and William Meyer, principals at Social Security Solutions, Inc., demonstrate how marginal tax rates can spike when a retiree collects both Social Security benefits and income drawn from tax-deferred accounts in the same year. The authors use a series of case studies to model how financial advisors can identify optimal tax-efficient strategies for clients who are able to delay the start of Social Security benefits. In the early years of retirement, income is drawn from tax-deferred accounts, and additional tax-deferred funds are converted to Roth accounts. When Social Security benefits later begin, the Roth accounts can be drawn upon tax-free as needed. This strategy can add significant value to portfolios by reducing income taxes and Medicare premiums.