Inflation has thrown everyone for a loop, especially those on a fixed retirement income. Social Security beneficiaries are hard pressed to keep up with rising prices. Despite an increase in benefits, Social Security has shown to fall short of expectations.
Additionally, Social Security taxes have left seniors struggling to save for the remainder of their retirements. Unlike the benefits themselves, Social Security taxes have yet to adjust for inflation. Politico’s Brain Faler looks at the potentiality of inflation-related earnings leading to double retirement taxation.
Inflating Retirement Taxation
It’s always important to remember how Social Security is taxed in the first place. If your combined income, the sum of your earnings and half of your total benefit, passes the threshold, then you pay a percentage of income tax on your benefit. While Social Security taxes have yet to adjust, standard tax brackets for heads-of-households, single, and joint filers have increased. This creates a weird, tax vortex.
Let us explain. If your standard deduction increases, your taxable income lowers. When your taxable income lowers, you report higher earnings and your combined income increases. If your combined income increase, your chances of paying higher Social Security taxes increase too. No matter how you look at it, Social Security taxes are near impossible to avoid.
This could potentially force seniors who haven’t payed Social Security taxes into rough financial waters, having to pay taxes on earnings and now benefits too.
The Retirement We Have
Unfortunately, not everything goes according to plan. We try our best to think of things ahead of time, but no one can be expected to perfectly predict the future. Inflation has thrown us a curve, so the best thing to do now is adapt as we go. Seniors are resilient and so is our economy, the fight right now is to try and take back as much time to recover as possible.
The Council for Retirement Security wants to protect each senior’s retirement. Double retirement taxation hurts everyone, and its clear Social Security taxes need to change. Follow the Council and demand that change from your leadership today.