00:00Unpacking the beautiful bill, Social Security, Taxes, and Your Wallet.
00:05Social Security benefits are a lifeline, with the average monthly check now over $2,000.
00:11But the biggest headline-grabbing change this year is a new temporary tax deduction for seniors,
00:16signed into law as part of the one big, beautiful bill.
00:20This deduction, available until 2028, offers $6,000 for single filers
00:25and $12,000 for married couples who qualify.
00:29To get the full deduction, single filers must have a modified adjusted gross income
00:34below $75,000 and married couples below $150,000.
00:40There are partial deductions for those with higher incomes.
00:43But those earning above $150,000 for single filers or $250,000 for married couples are not eligible.
00:51While this may sound like a big win for seniors, a closer look reveals a more complex picture.
00:57Experts say this deduction primarily benefits higher-income seniors,
01:01those with incomes between $80,000 and $270,000 for many low- and middle-income retirees,
01:08who often already pay little to no income tax on their Social Security benefits.
01:13This new deduction offers no real help.
01:16What's more, this new deduction, along with other tax cuts in the bill,
01:20is projected to accelerate the insolvency of the Social Security Retirement Fund
01:25and Medicare's Hospital Insurance Fund to 2032 a year.
01:29Sooner than previously projected, the message from the administration
01:33has been criticized for potentially confusing beneficiaries,
01:36who may still owe taxes despite the new deduction.
01:40This brings us to a crucial point.
01:42Your Social Security benefits can be taxed.
01:44Up to 85% of your benefits may be subject to federal income tax,
01:49depending on your household income.
01:51Withdrawals from traditional retirement accounts like a 401k or IRA
01:55can increase your taxable income,
01:57potentially causing more of your Social Security benefits to be taxed.
02:01To manage this, consider a few key strategies.
02:04Reduce withdrawals from traditional retirement accounts
02:06by prioritizing tax-free options like Roth IRAs.
02:10Think about doing a Roth conversion to move your savings into a tax-free account.
02:15Finally, delaying your Social Security benefits not only increases your checks,
02:20but also allows you to rely less on taxable retirement account withdrawals
02:24in early retirement, which can reduce your overall tax burden.
02:28Navigating these new rules is complex,
02:31and consulting a financial professional is always a smart move
02:34to optimize your personal strategy.
02:36Money Explainers
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