COLA, designed to counteract inflation, reviews price changes annually. In 2023, a record 8.7% increase occurred, primarily due to inflation in 2022. For 2024, the COLA is 3.2%, resulting in a $57.48 monthly rise in the average retirement benefit
Increased benefits may push retirees into a new tax bracket. However, the IRS has adjusted income thresholds by 5.4% to accommodate the higher cost of living. This aims to prevent taxpayers from moving to a higher tax bracket solely due to increased living costs
Social Security benefits' taxability, established in 1984, ranges from 50% to 85%. The formula considers earned income, taxable interest, dividends, pensions, annuities, and other income. Understanding these thresholds is crucial to estimating the tax impact
For married couples filing jointly with a total income of $32,000 or less, no Social Security taxes apply. Income between $32,000 and $44,000 may incur up to 50% taxation, while over $44,000 could lead to 85% taxable benefits. Similar thresholds apply for individuals filing as single
In 2024, the qualified charitable distribution limit increases to $105,000. The annual gift amount rises to $18,000 per person or $36,000 for married couples. These changes offer strategic options for retirees to manage taxes
Twelve states tax some Social Security benefits. Retirees should explore state income tax breaks. For example, Kentucky provides a $31,110 exclusion for retirement plan income
Consider adjustments to other income streams, like pensions and interest from CDs or money markets, to offset potential tax impacts. Assessing state tax laws and optimizing income sources can enhance tax planning
The annual gift amount increase to $18,000 per person offers opportunities for gifting strategies. Understanding lifetime gifting limits (up to $13.61 million) can aid in effective estate planning
Retirees should proactively plan for Social Security tax implications. Factors such as state laws, gifting strategies, and income source adjustments play a vital role in optimizing tax outcomes