July 10, 2025 • 9 mins
“Hey Mike, is it true that Roth Income affects your social security taxes bracket?”Discover how your Social Security benefits are calculated and if your Roth IRA income affects those calculations.
Text your questions to 913-363-1234.
Request Your Wealth Analysis by going to www.retireontime.com
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Mike (00:05):
Welcome to How to Retire on Time, a show that answers
your retirement questions. Myname is Mike Decker along with
David Franson over here, andwe're gonna be taking your
questions. Just text them rightnow to (913) 363-1234, and we'll
take them one at a time. Again,that number, (913) 363-1234.
Let's begin.
David (00:22):
Hey, Mike. Is it true that Roth income affects your
Social Security tax bracket?
Mike (00:27):
Now this is a common misconception I hear, and it's
in the article worksheet,whatever you call, nine fifteen
from the Social SecurityAdministration that shows you
how to calculate SocialSecurity. So let me define
really quickly how this works.Yeah. Okay? Social Security,
contrary to most people'sbelief, is not calculated based
on your adjusted gross income.
(00:48):
It's not calculated with yourstandard deduction. Like, it's
earlier on in the taxcalculation process, and it's
called your provisional income.What is your provisional income?
Your provisional income takesinto account all of your taxable
income without the standarddeduction. So all of the taxable
income coming in, all the incomefrom your pension, from your IRA
(01:10):
distributions, so pretax,traditional IRA, not Roth, but
all the taxable income takesinto account capital gains.
K? So all of that is is lumpedtogether. It also includes half
of your Social Security benefit.Okay. So all of your taxable
income Yes.
Half of your Social Securitybenefit, and all of your exempt
(01:32):
interest, not exempt income.Social Security is deferred or
exempt growth that comes out taxfree. Municipal bonds have
interest that's tax exemptdepending on your state and
which municipal bond youpurchased.
David (01:48):
Okay.
Mike (01:49):
And many people will say, well, that's the same thing.
It's not. So your SocialSecurity income, as long as you
do your plan correctly, if it'swithin striking distance, should
not, based on current tax law,affect your Social Security
benefits. It doesn't show up onyour provisional income. Now the
IRS does track your Roth assetsbecause it needs to hold you
(02:10):
accountable for when it goes toa beneficiary and how long they
have in there, and did theyclear it out within like, they
still need to keep tabs of yourRoth.
Many people are speculating thatthey'll eventually tax Roth. I
highly doubt that would happen.Many people are speculating
they're gonna change the SocialSecurity bit. Tax law is written
in pencil, so anything couldhappen. But based on right now,
(02:32):
Social Security is not affectedby your Roth income.
It is not tax exempt interest.It is that that's a municipal
bond that they're talking aboutspecifically. And there might be
some other things too in weirdsituations, but that's what you
need to understand about SocialSecurity income.
David (02:49):
So you can still, for now, you can still just keep
taking those Roth distributions,and you don't have to worry
about paying any income tax onthat because it's
Mike (02:59):
Yeah. You could do capital gains too as long as you keep it
within the zero tax bracket.Mean, there's there are ways to
get zero Social Security tax.That's that's basically 0% of
your Social Security is subjectto taxes. But many times, people
unintentionally will try to getthere, not realizing that
they've accentuated their lossesby pulling too much out of their
(03:22):
accounts, too much out of theirprincipal by trying to convert
everything to Roth quickly.
It's like the old expression,did you jump over dimes to pick
up pennies? I actually justrecently did Wednesday webinars
every single week, and itrotates through income, Social
Security, taxes. They're free toeveryone, whoever wants. If
you're on our newsletter, whichyou can go to retireontime.com
and sign up for our newsletter,you'll get the invites to these
(03:43):
open q and a webinars. They'reevery Wednesday at noon.
I just teach a principle or astrategy. You don't be a client.
Like, anyone can tap into these,and then there's open q and a.
And the last one, we we brokedown real real simply RMDs, IRA
to Roth conversions, and how doyou handle all that. It was very
telling that there's multipleways you could do it based on
(04:03):
how much you have saved, howmuch you have in your pretax
accounts, like your IRA, howmuch you have in your brokerage
account, and the rolling overtaxes on your dividends and so
on, and if that's an issue.
And then also, how close are youto tax free Social Security?
Most people I work with shouldnot aim for tax free Social
(04:25):
Security because they will, inmy opinion, jump over diamonds
to pick up pennies.
David (04:29):
It almost seems like it's like a bragging ride just so you
can say, I got this for free.Right?
Mike (04:33):
Yeah. I mean, I've found that if you have a million
dollars or less, typically, youmight be within striking
distance of eventually gettingto tax free social security
based on current tax law. Butyou have to have less money to
even wanna get there. It's notworth the hit to principal to
pay the taxes, to quicklyconvert assets, and so on. And a
(04:54):
lot of people are making veryemotional decisions just so you
know the genesis of all this,because they're hearing that
they might tax Roth in thefuture, or they might do this,
they might do that.
Just understand anything youhear from a marketing
perspective is probably fueledby a product or service that is
trying to be sold. I mean, yeah,this radio show, technically
speaking, is intended to sellpeople on the idea of
(05:16):
considering us to be theirwealth adviser, either to put
them into a one time plan wherewe teach them how to fish, or
they could become a privateclient member, and then they're
paying us a flat monthly rateof, I don't know, somewhere
between 4 to $600 a month. Like,yeah, that's kind of why we do
this show. Now the other part ofit is I do like to publicly
define things as they are,whether the people work with us
(05:38):
or not, but I don't really mindwhat people end up doing as long
as it's right for them. I'm notpushing everyone does this or
everyone does that, which is whyI think we have a little bit
more flexibility and a littlebit credibility in doing this
show compared to other showsthat you might find.
It's because we believe there'smore than 10 ways to solve
incoming retirement. We're notpaid more by keeping more of
(06:00):
your assets at risk. We're notpaid more by any one agenda. I
mean, it's just it's like youpay your CPA to file your taxes,
and there's a fixed rate forthat. We're charging a fixed
rate on how to get the job doneregardless of how much money
you've saved.
So it allows us to have a moreopen and honest conversation, in
my opinion. That's why westructure the company this way,
(06:20):
is because of things like this.We don't wanna sound smart,
quote, unquote, to do taxplanning when the real agenda is
to push some large indexuniversal life insurance policy,
or we don't wanna sound taxsmart because we're creating
fear into doing one thing or theother. It's like, no. Every
strategy has benefits anddetriments.
(06:41):
We gotta figure out which one'sright for you. And for this
situation, which one's right foryou? It depends on a number of
factors. But hopefully, havecomfort in us acknowledging that
it depends and breaking downthe, well, over here, it might
be right for you, but overthere, it might be right for
them. We like simple.
It's easy to go to the grocerystore and say, I like these
(07:03):
vegetables, and I'm gonna buythese these foods. It's easy to
compare two options. Right?Finance, there are so many
variations to it. I think that'swhy it overwhelms a lot of
people, and why they kind ofpush it down the road.
And I get that. But it dependsis the correct answer. If
everyone should do one thing, Iwould question that advice. What
(07:25):
do you think, David? Your yourthoughts?
David (07:28):
Yeah. My thoughts. I I think I'm glad that there's
somebody out there, and this isgonna sound like a brown noser,
but to explain this stuff to ussort of with no, you know,
outsized agenda behind it.Right? Yeah.
Yeah. I mean, this is an honestquestion, and we're gonna answer
it honestly. And so the ultimateanswer is
Mike (07:45):
Your retirement's not ruined if you pay taxes for
Social Security. Yes. Yourretirement's not ruined if you
file for Social Security at 62or 70 years old. It's just these
decisions affect your plans indifferent ways. What's the
purpose of your money?
How about we define that first?How about we slow down on the
suitability and really explorethese things?
David (08:02):
Yeah. Right.
Mike (08:02):
Who's doing that? I mean, really. Who's trying to convince
you not to do things, eventhough it just yeah. Anyway,
it's easy to ask someone to comein and say, hey, what do you
want? Great.
Let's just do that so we cangain you as a client. Who's
gonna sit down and say, are yousure? Here are the things you
may not know. That's a trueplanning process, is to push
(08:26):
back anything you say, to pushback, and to explore the
benefits and detriments of thatjust to make sure. I mean, for
goodness sake, how much time dowe take to buy a car?
That's a pretty simple purchase.It's a big purchase. How much
time do we take really checkingourselves on the decisions we're
making for our financial plan,for our retirement plan? That's
(08:48):
a thirty year decision that justis gonna affect every bit of our
overall quality of life. Sofinding someone that agrees with
us may or may not be in our bestinterest.
Finding someone who's able toagree, but is willing to push
back. That's the person Ibelieve you may want to talk
with. Agreed. That's all thetime we've got for the show
(09:09):
today. If you enjoyed the show,consider subscribing to it
wherever you get your podcast.
Just search for how to retire ontime. Discover if your portfolio
is built to weather flat marketcycles if you're missing tax
minimization opportunities thatyou may not even know exist.
Explore strategies that may beable to help you lower your
overall risk while potentiallyincreasing your overall growth
(09:30):
and lifestyle flexibility. Thisis not your ordinary financial
analysis. Learn more about YourWealth Analysis and what it
could do for you regardless ofyour age, asset, or target
retirement date.
Go to www.yourwealthanalysis.comtoday to learn more and get
started.
Welcome to How to Retire on Time, a show that answers
your retirement questions. Myname is Mike Decker along with
David Franson over here, andwe're gonna be taking your
questions. Just text them rightnow to (913) 363-1234, and we'll
take them one at a time. Again,that number, (913) 363-1234.
Let's begin.
David (00:22):
Hey, Mike. Is it true that Roth income affects your
Social Security tax bracket?
Mike (00:27):
Now this is a common misconception I hear, and it's
in the article worksheet,whatever you call, nine fifteen
from the Social SecurityAdministration that shows you
how to calculate SocialSecurity. So let me define
really quickly how this works.Yeah. Okay? Social Security,
contrary to most people'sbelief, is not calculated based
on your adjusted gross income.
(00:48):
It's not calculated with yourstandard deduction. Like, it's
earlier on in the taxcalculation process, and it's
called your provisional income.What is your provisional income?
Your provisional income takesinto account all of your taxable
income without the standarddeduction. So all of the taxable
income coming in, all the incomefrom your pension, from your IRA
(01:10):
distributions, so pretax,traditional IRA, not Roth, but
all the taxable income takesinto account capital gains.
K? So all of that is is lumpedtogether. It also includes half
of your Social Security benefit.Okay. So all of your taxable
income Yes.
Half of your Social Securitybenefit, and all of your exempt
(01:32):
interest, not exempt income.Social Security is deferred or
exempt growth that comes out taxfree. Municipal bonds have
interest that's tax exemptdepending on your state and
which municipal bond youpurchased.
David (01:48):
Okay.
Mike (01:49):
And many people will say, well, that's the same thing.
It's not. So your SocialSecurity income, as long as you
do your plan correctly, if it'swithin striking distance, should
not, based on current tax law,affect your Social Security
benefits. It doesn't show up onyour provisional income. Now the
IRS does track your Roth assetsbecause it needs to hold you
(02:10):
accountable for when it goes toa beneficiary and how long they
have in there, and did theyclear it out within like, they
still need to keep tabs of yourRoth.
Many people are speculating thatthey'll eventually tax Roth. I
highly doubt that would happen.Many people are speculating
they're gonna change the SocialSecurity bit. Tax law is written
in pencil, so anything couldhappen. But based on right now,
(02:32):
Social Security is not affectedby your Roth income.
It is not tax exempt interest.It is that that's a municipal
bond that they're talking aboutspecifically. And there might be
some other things too in weirdsituations, but that's what you
need to understand about SocialSecurity income.
David (02:49):
So you can still, for now, you can still just keep
taking those Roth distributions,and you don't have to worry
about paying any income tax onthat because it's
Mike (02:59):
Yeah. You could do capital gains too as long as you keep it
within the zero tax bracket.Mean, there's there are ways to
get zero Social Security tax.That's that's basically 0% of
your Social Security is subjectto taxes. But many times, people
unintentionally will try to getthere, not realizing that
they've accentuated their lossesby pulling too much out of their
(03:22):
accounts, too much out of theirprincipal by trying to convert
everything to Roth quickly.
It's like the old expression,did you jump over dimes to pick
up pennies? I actually justrecently did Wednesday webinars
every single week, and itrotates through income, Social
Security, taxes. They're free toeveryone, whoever wants. If
you're on our newsletter, whichyou can go to retireontime.com
and sign up for our newsletter,you'll get the invites to these
(03:43):
open q and a webinars. They'reevery Wednesday at noon.
I just teach a principle or astrategy. You don't be a client.
Like, anyone can tap into these,and then there's open q and a.
And the last one, we we brokedown real real simply RMDs, IRA
to Roth conversions, and how doyou handle all that. It was very
telling that there's multipleways you could do it based on
(04:03):
how much you have saved, howmuch you have in your pretax
accounts, like your IRA, howmuch you have in your brokerage
account, and the rolling overtaxes on your dividends and so
on, and if that's an issue.
And then also, how close are youto tax free Social Security?
Most people I work with shouldnot aim for tax free Social
(04:25):
Security because they will, inmy opinion, jump over diamonds
to pick up pennies.
David (04:29):
It almost seems like it's like a bragging ride just so you
can say, I got this for free.Right?
Mike (04:33):
Yeah. I mean, I've found that if you have a million
dollars or less, typically, youmight be within striking
distance of eventually gettingto tax free social security
based on current tax law. Butyou have to have less money to
even wanna get there. It's notworth the hit to principal to
pay the taxes, to quicklyconvert assets, and so on. And a
(04:54):
lot of people are making veryemotional decisions just so you
know the genesis of all this,because they're hearing that
they might tax Roth in thefuture, or they might do this,
they might do that.
Just understand anything youhear from a marketing
perspective is probably fueledby a product or service that is
trying to be sold. I mean, yeah,this radio show, technically
speaking, is intended to sellpeople on the idea of
(05:16):
considering us to be theirwealth adviser, either to put
them into a one time plan wherewe teach them how to fish, or
they could become a privateclient member, and then they're
paying us a flat monthly rateof, I don't know, somewhere
between 4 to $600 a month. Like,yeah, that's kind of why we do
this show. Now the other part ofit is I do like to publicly
define things as they are,whether the people work with us
(05:38):
or not, but I don't really mindwhat people end up doing as long
as it's right for them. I'm notpushing everyone does this or
everyone does that, which is whyI think we have a little bit
more flexibility and a littlebit credibility in doing this
show compared to other showsthat you might find.
It's because we believe there'smore than 10 ways to solve
incoming retirement. We're notpaid more by keeping more of
(06:00):
your assets at risk. We're notpaid more by any one agenda. I
mean, it's just it's like youpay your CPA to file your taxes,
and there's a fixed rate forthat. We're charging a fixed
rate on how to get the job doneregardless of how much money
you've saved.
So it allows us to have a moreopen and honest conversation, in
my opinion. That's why westructure the company this way,
(06:20):
is because of things like this.We don't wanna sound smart,
quote, unquote, to do taxplanning when the real agenda is
to push some large indexuniversal life insurance policy,
or we don't wanna sound taxsmart because we're creating
fear into doing one thing or theother. It's like, no. Every
strategy has benefits anddetriments.
(06:41):
We gotta figure out which one'sright for you. And for this
situation, which one's right foryou? It depends on a number of
factors. But hopefully, havecomfort in us acknowledging that
it depends and breaking downthe, well, over here, it might
be right for you, but overthere, it might be right for
them. We like simple.
It's easy to go to the grocerystore and say, I like these
(07:03):
vegetables, and I'm gonna buythese these foods. It's easy to
compare two options. Right?Finance, there are so many
variations to it. I think that'swhy it overwhelms a lot of
people, and why they kind ofpush it down the road.
And I get that. But it dependsis the correct answer. If
everyone should do one thing, Iwould question that advice. What
(07:25):
do you think, David? Your yourthoughts?
David (07:28):
Yeah. My thoughts. I I think I'm glad that there's
somebody out there, and this isgonna sound like a brown noser,
but to explain this stuff to ussort of with no, you know,
outsized agenda behind it.Right? Yeah.
Yeah. I mean, this is an honestquestion, and we're gonna answer
it honestly. And so the ultimateanswer is
Mike (07:45):
Your retirement's not ruined if you pay taxes for
Social Security. Yes. Yourretirement's not ruined if you
file for Social Security at 62or 70 years old. It's just these
decisions affect your plans indifferent ways. What's the
purpose of your money?
How about we define that first?How about we slow down on the
suitability and really explorethese things?
David (08:02):
Yeah. Right.
Mike (08:02):
Who's doing that? I mean, really. Who's trying to convince
you not to do things, eventhough it just yeah. Anyway,
it's easy to ask someone to comein and say, hey, what do you
want? Great.
Let's just do that so we cangain you as a client. Who's
gonna sit down and say, are yousure? Here are the things you
may not know. That's a trueplanning process, is to push
(08:26):
back anything you say, to pushback, and to explore the
benefits and detriments of thatjust to make sure. I mean, for
goodness sake, how much time dowe take to buy a car?
That's a pretty simple purchase.It's a big purchase. How much
time do we take really checkingourselves on the decisions we're
making for our financial plan,for our retirement plan? That's
(08:48):
a thirty year decision that justis gonna affect every bit of our
overall quality of life. Sofinding someone that agrees with
us may or may not be in our bestinterest.
Finding someone who's able toagree, but is willing to push
back. That's the person Ibelieve you may want to talk
with. Agreed. That's all thetime we've got for the show
(09:09):
today. If you enjoyed the show,consider subscribing to it
wherever you get your podcast.
Just search for how to retire ontime. Discover if your portfolio
is built to weather flat marketcycles if you're missing tax
minimization opportunities thatyou may not even know exist.
Explore strategies that may beable to help you lower your
overall risk while potentiallyincreasing your overall growth
(09:30):
and lifestyle flexibility. Thisis not your ordinary financial
analysis. Learn more about YourWealth Analysis and what it
could do for you regardless ofyour age, asset, or target
retirement date.
Go to www.yourwealthanalysis.comtoday to learn more and get
started.
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