When people envision retirement, they often focus on investment returns and income sources—but one frequently overlooked area is how taxes will affect that income. For many, Social Security plays a key role in retirement funding. However, depending on your income level, a portion of those benefits may be taxable. Understanding how Social Security taxes in retirement work—and incorporating strategies to manage them—can help preserve more of your available income and support long-term goals.
How Social Security Is Taxed
Social Security benefits are subject to federal income tax based on a formula that includes your “combined income.” This figure is the sum of your adjusted gross income, nontaxable interest, and half of your Social Security benefits. If your combined income exceeds a certain threshold, up to 85% of your Social Security benefits may be taxed.
For example, in 2025:
- Individuals with combined income between $25,000 and $34,000 may owe tax on up to 50% of their benefits.
- Above $34,000, up to 85% of benefits may be taxable.
- For married couples filing jointly, the thresholds are $32,000 and $44,000, respectively.
These thresholds are not indexed for inflation, which means that over time, more retirees may find themselves paying tax on their benefits.
Why Social Security Taxes Matter in Retirement
Even if the tax impact seems modest, it can have a compounding effect over time. Taxes reduce the net income available to cover living expenses, healthcare, or discretionary spending. For retirees on a fixed income, even a small increase in taxes can influence budgeting decisions.
Additionally, many retirees draw income from multiple sources—such as retirement accounts, pensions, or investment portfolios. The order and timing of withdrawals can affect total taxable income, pushing some people into higher tax brackets or triggering increased taxation of Social Security benefits.
Planning Strategies to Consider
Fortunately, there are ways to help manage Social Security taxes in retirement through careful coordination of income sources. Here are a few planning strategies to explore:
- Adjusting the Timing of Benefit Claims
Delaying Social Security benefits beyond full retirement age may increase your monthly benefit amount, but it also reduces the number of years your benefits are subject to taxation. In some cases, retirees may rely on other income sources first—such as after-tax savings or Roth accounts—to reduce taxable income early in retirement.
This approach may help postpone the tax impact and reduce the percentage of benefits that are taxed in later years.
- Managing Distributions from Retirement Accounts
Traditional IRAs and 401(k)s generate taxable income upon withdrawal. Taking large distributions in a single year can push your income over key thresholds, leading to higher taxes on Social Security benefits.
By spreading withdrawals over time or strategically converting portions of traditional IRAs to Roth IRAs before claiming Social Security, you may be able to manage your tax bracket more effectively. This could help reduce both overall tax liability and the portion of your benefits subject to tax.
- Leveraging Roth Accounts and Non-Taxable Income Sources
Roth IRA distributions are generally not counted in your combined income, meaning they typically don’t increase the taxation of your Social Security benefits. Similarly, certain forms of municipal bond interest or health savings account (HSA) withdrawals used for qualified expenses may also avoid triggering additional taxation.
By drawing from these accounts during years when income needs to stay below certain thresholds, you may be able to better manage your tax situation.
- Coordinating with Required Minimum Distributions (RMDs)
After age 73, retirees must begin taking required minimum distributions from traditional retirement accounts. These mandatory withdrawals add to taxable income and can trigger taxes on Social Security benefits. Planning in advance for RMDs—whether through early distributions, conversions, or shifting assets—can help smooth income levels over time.
Reviewing your RMD strategy well before age 73 gives you more flexibility to make adjustments that align with your broader retirement plan.
Working with a Financial Professional
Because Social Security taxation is connected to overall income strategy, a personalized approach is often the most effective. No one-size-fits-all method applies to every retiree, so working with a financial professional who understands tax coordination, withdrawal planning, and Social Security benefits can help you explore options tailored to your situation.
Regular plan reviews are also key. As your life changes, your income strategy may need to evolve in response to shifting tax laws, healthcare expenses, or lifestyle needs.
Keeping Social Security Taxes in Retirement in Perspective
While Social Security taxes in retirement are not always avoidable, thoughtful planning can often reduce their impact. Whether you’re preparing to claim benefits soon or already receiving them, revisiting your income sources and timing strategies can support your ability to make informed financial choices.
At Securenet Financial, we help clients design retirement strategies that reflect their values, priorities, and lifestyle goals. If you want to better understand how your income streams may affect your Social Security benefits—or explore options to help reduce the tax burden—our team is ready to guide you.
Schedule a call with us today to discuss how we can support your goals with a personalized plan.
