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By:Savardekar
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Social Security income may appear to be your sole reward for a lifetime of payroll tax contributions to the program, but Uncle Sam will still get his cut once you retire and begin receiving benefits.
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Depending on your combined retirement income, you may be required to pay federal taxes on Social Security benefits.
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In this case, "combined income" is the sum of your AGI, nontaxable interest, and one-half of your Social Security benefits.
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1. Keep Your Income Down: Make certain that you do not exceed the income thresholds listed above.
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2. Withdraw from Tax-Free Roths: Rolling over money from a traditional IRA or 401(k) to a Roth before receiving Social Security benefits is a good way to avoid taxes in retirement.
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3. Withdraw from Retirement Accounts Before Signing Up for Social Security: You can begin taking penalty-free distributions as early as age 59 1/2 and even 55 in some cases.
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4. Buy a Qualified Longevity Annuity Contract: You can lower both your income and your tax bill by reducing the size of your RMD. QLAC is not considered calculating required minimum distribution.
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5. Steer Clear of Municipal Bonds: Avoiding munis can help you reduce your combined income and avoid paying taxes on your benefits.