Tax Planning in Retirement – Social Security, Roth Conversions, Dividends, and Annuities, Oh My!

Contributed by: Logan Dimitrie, CFP®

Why is Tax Planning Important?

Tax planning in retirement is important because you are no longer accumulating … you are now in the distribution phase … or “paying yourself.”

There are tax-efficient ways to do this. There are even some pitfalls to watch out for.

Introduction: A Different Lens on Retirement Income

At our firm, one of our core values is Commitment to Financial Planning. That means going beyond investment returns and focusing on after-tax outcomes.

In retirement, taxes don’t disappear; they become more complex.

The real opportunity lies in coordinating income sources, timing decisions, and understanding how different buckets are taxed.

Today, we’re going to explore:

• Why dividend-heavy strategies can backfire

• The power of capital gains brackets

• Roth conversion opportunities (and pitfalls)

• How Social Security taxation quietly increases your effective tax rate

• Why product decisions, like annuities, can limit flexibility

1. Not All “Income” Is Created Equal

One of the biggest misconceptions we see is the idea that dividends are inherently tax-efficient.

While qualified dividends can receive favorable tax treatment, they still:

• Add to your total taxable income

• Interact with other income sources (Social Security, IRA withdrawals, new OBBBA enhanced senior deduction thresholds)

• Can push you into higher tax brackets or increase Social Security taxation

Meanwhile, other strategies (like capital gain realization) can be more controllable and tax-efficient.

The Key Distinction:

• Ordinary income: IRA withdrawals, annuities, and non-qualified dividends could be taxed up to 37%

• Capital gains / qualified dividends: taxed at 0%, 15%, or 20% depending on income

Bottom line … tax treatment matters.

2. Capital Gains Brackets: A Huge Planning Opportunity

The tax code gives retirees a powerful planning window through preferential capital gains rates.

2026 Federal Capital Gains Thresholds (Taxable Income)

Married Filing Jointly:

• 0% rate: up to $98,900

• 15% rate: $98,900 to $613,700

Single filers:

• 0% rate: up to $49,450

• 15% rate: $49,450 to $545,500

These brackets sit on top of ordinary income.

Important nuance:

Your ordinary income fills the bracket first, and capital gains stack on top.

Planning opportunities:

• Tax-gain harvesting at 0%

• Coordinating withdrawals across pre-tax, after-tax, and Roth accounts

• Avoiding unnecessary dividend income that fills these brackets

3. Why Dividend Investing Can Actually Hurt You

Dividend investing is often marketed as “safe income,” but from a planning perspective, it can reduce flexibility.

The problem:

Dividends are:

• Forced income

• Taxable every year

• Not easily turned off in high-income years

Compare that to:

• Selling appreciated assets (you control timing)

• Using Roth funds (tax-free)

• Managing bracket exposure

Real planning issue:

Dividends can:

• Push you out of the 0% capital gains bracket

• Increase Social Security taxation

• Reduce your ability to execute Roth conversions efficiently

This is where our company value of Education and Personal Growth matters. We want clients to understand that “income” is not always optimal.

4. Roth Conversions: Filling the 12% Bracket Strategically

One of the most valuable retirement strategies is Roth conversion planning.

2026 Ordinary Income Anchors (MFJ):

• 12% bracket top: $100,800 taxable income

This creates a window to:

• Convert IRA assets at relatively low rates

• Reduce future RMDs

• Improve long-term tax diversification

Enhanced Senior Deduction Opportunity

OBBBA adds:

• $6,000 per person age 65+ (up to $12,000 MFJ)

• Begins phase-out at $150,000 MAGI (MFJ)

Planning opportunity:

• Convert income up to that phase-out threshold

• Capture deductions & low brackets simultaneously

5. The Hidden Trap: Effective Tax Rates & Social Security

This is where planning becomes critical.

Social Security taxation creates a “tax torpedo” effect:

• 0% taxable at low income

• Up to 50% taxable

• Up to 85% taxable once thresholds are exceeded

2026 Key Thresholds (MFJ):

• $32,000 … taxation begins

• $32,000–$44,000: up to 50% taxable

• Over $44,000: up to 85% taxable

These thresholds are based on the provisional income calculation for Social Security.

Why this matters:

Every additional $1 of income can:

• Trigger more SS becoming taxable

• Create an effective marginal rate far higher than 12%

Example: A “12% bracket” Roth conversion may actually feel like:

• 18%

• 22%

• Or higher after SS inclusion

It’s not about your marginal bracket. It’s about your effective rate on the next dollar.

This is where our other company value, Teamwork and Collaboration, matters. The analysis must be coordinated across:

• Tax projections

• Retirement income sources

• Timing of Social Security

For many retirees, the most attractive window for Roth conversions is the period after you retire but before you begin Social Security. During those years, income is often temporarily lower and easier to control. Once Social Security begins, the analysis becomes more complex, and it is important to evaluate whether conversions still make sense based on your effective tax rate.

6. Annuities & Their Flexibility Trade-Off

Annuities can serve a purpose, but they come with a planning cost.

The issue:

• Income is typically fully taxable as ordinary income

• Payments are often fixed and inflexible

• Little control over timing

Planning consequences:

• Fills up lower tax brackets

• Reduces room for Roth conversions

• Can increase Social Security taxation

• Amplifies the widow’s penalty

Widow’s penalty risk:

• Surviving spouse moves to single brackets

• Same income, but at higher rates

• Fixed annuity income leaves no adjustment flexibility

Flexibility is a tax asset.

7. Bringing It Back to CENTER

This is where our team’s values come to life:

• Commitment: We go beyond surface-level strategies

• Education: Helping clients understand tax mechanics

• Nice & Kind: Explaining complex topics simply

• Teamwork: Coordinating tax, investment, and retirement plans

• Energy: Proactively identifying opportunities

• Real: Honest conversations about trade-offs

Conclusion: Tax Planning Is the Strategy

Retirement is not just about generating income; it’s about controlling how that income shows up on your tax return.

The difference between a good plan and a great plan often comes down to:

• Timing

• Tax characterization

• Coordination across income sources

Every decision … income, investments, products … should be evaluated through a tax lens.

If you have any questions or would like to discuss how these strategies may affect your financial plan, please use this link to schedule a complimentary introductory call with me.

Logan Dimitrie, CFP® is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® Logan specializes in Financial Independence, Early Retirement, Financial Planning for caregivers and Longevity Planning. Logan has been featured on the Caffeinated Conversations podcast.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Center for Financial Planning, Inc is not a registered broker/dealer and is independent of Raymond James Financial Services Investment advisory services are offered through Center for Financial Planning, Inc. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Logan Dimitrie, CFP® and not necessarily those of Raymond James.

Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion.

Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation.

The Social Security Sweet Spot – Claiming Too Early Could Cost You Thousands

Contributed by: Josh Bitel, CFP®

When it comes to retirement planning, few decisions are as consequential as when to claim Social Security benefits. I’ve heard it dozens of times: “my paycheck has been funding this benefit for decades, it’s my money and I want it as soon as I can get it!” While I can sympathize with this, the drawback of claiming your benefits too soon could cost you thousands of dollars over your lifetime and could even impact spousal financial security.

Understanding the Claiming Window

The earliest you can claim Social Security benefits is age 62. However, taking this offer immediately comes at a significant cost – your monthly benefit will be permanently reduced by roughly 30% for folks who have a full retirement age (FRA) of 67. On the other hand, you can delay receiving your benefits beyond your FRA, up to age 70. The benefit of doing so is an increase of 8% per year for every year you delay beyond your FRA.

The mathematical difference between claiming at age 62 and delaying until age 70 results in a benefit that is 70%-80% higher for those who delay. This increased benefit is locked in for life and adjusts for inflation annually. Additionally, an often-overlooked part of this decision is that a surviving spouse can take over this larger benefit if their own benefit is lower.

Longevity Risk and Break-Even Analysis

Whenever I am asked “when should I file for Social Security?” I jokingly reply – tell me exactly how long you will live, and I will tell you exactly when to claim! Afterall, a key consideration for timing your benefits is longevity – something we can only predict. In a nutshell, if you expect to live well into your 80s or beyond, delaying your benefit will yield higher lifetime income. However, if you don’t expect to be around that long – claiming earl can result in receiving more total benefits. When we apply math to this equation, we calculate a “break-even age”, or the age at which your total benefits from delaying will equal your total benefits if claiming early. This age typically falls in your late 70s or early 80s. Therefore, if you expect to live longer than age 80 – delaying your benefits would make mathematical sense.

Spousal and Survivor Considerations

An often-overlooked factor when claiming Social Security is the effect on spouses and survivors. Benefits received by spouses and survivors are directly tied to the higher earner’s claiming age. If the higher-earning spouse delays benefits, it not only increases their own benefit but also boosts the survivor benefit the other spouse may rely on later. For married couples, coordinating claiming strategies can add significant value over time. For example, one spouse may claim earlier to provide income while the higher earner delays to maximize long-term benefits. This can be especially impactful if one spouse lives much longer than the other.

Making the “Right” Decision

While the financial math is important, the “right” time to claim Social Security is not purely a numbers decision. Health status, employment plans, lifestyle goals, and risk tolerance all play a role. Someone in poor health or with immediate income needs may benefit from claiming early, while those with longevity in their family and sufficient savings might benefit from waiting.

Importantly, Social Security is not a one-size-fits-all decision. The optimal strategy balances financial efficiency with personal priorities.

The timing of claiming Social Security benefits is one of the most impactful and irreversible decisions in retirement planning. It affects not only how much you receive each month, but also how long your assets last, your tax exposure, and the financial well-being of your spouse and survivors.

By carefully evaluating your options and considering both financial and personal factors, you can turn Social Security into a strategic advantage—one that supports a more secure and confident retirement. If you or someone you care about is struggling to put these pieces together, our team is here to help!

Josh Bitel, CFP® is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® He conducts financial planning analysis for clients and has a special interest in retirement income analysis.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Josh Bitel, CFP® and not necessarily those of Raymond James.

There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

When a Loved One Dies: Understanding the First Steps

Contributed by: Sandra Adams, CFP®

When a spouse or partner dies, the world can shift in an instant. Even when plans are in place, the surviving partner often wonders, “What do I do first?” It’s a question we hear often, and it usually comes from a place of love, worry, and a desire to honor the person who has died.

Start with Safety and Confirmation

If the death occurs at home, your first call depends on the circumstances. If hospice is involved, call the hospice nurse—they will guide you through the pronouncement of death and the next steps. If hospice is not involved, call 911 or the local police. They will come to the home, assess the situation, and coordinate the official pronouncement.

Contact the Funeral Home or Cremation Provider

Once there is a pronouncement, your chosen funeral home or cremation provider is typically the next call. If you have a prepaid plan, they will walk you through what they need and what happens next. There is no need to rush—these professionals handle this every day and will guide you gently. *Note: the funeral home or cremation provider will notify Social Security of the death for you.

Notify Key Professionals and Gather Only What’s Essential in the First Few Days

Notify key professional advisors (financial planners, attorney, etc.)  and locate basic documents such as the will or trust, powers of attorney, and any prepaid funeral contracts. You do not need to empty safe‑deposit boxes or withdraw bank accounts immediately. Many long‑held myths about “empty it right away” no longer apply, and most accounts today pass by title or beneficiary designation. Other than cash for immediate expenses, most financial decisions can wait until you are ready to make them later.

Move at a Human Pace

Grief and logistics rarely align. Your job in the early days is simply to take the next right step. Our job is to help you sort through the financial and administrative pieces with clarity and steadiness.

If you or someone you love is navigating a recent loss, please reach out. You don’t have to do this alone. We are always here to help!

Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Sandra D. Adams and not necessarily those of Raymond James.

Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc.® is not a registered broker/dealer and is independent of Raymond James Financial Services.

7 Ways the Planning Doesn't Stop When You Retire

Contributed by: Sandra Adams, CFP®

Most materials related to retirement planning are focused on “preparing for retirement” to help clients set goals and retire successfully. Does that mean when goals are met, the planning is done? In my work, there is often a feeling that once clients cross the retirement “finish line” it should be smooth sailing from a planning standpoint. Unfortunately, nothing could be further from the truth. For many clients, post-retirement is likely when they’ll need the assistance of a planner the most!

Here are 7 planning post-retirement issues that might require the ongoing assistance of a financial advisor:

1. Retirement Income Planning - An advisor can help you put together a year-by-year plan including income, resources, pensions, deferred compensation, Social Security and investments. The goal is to structure a tax-efficient strategy that is most beneficial to you.

2. Investments - Once you are retired, a couple of things happen to make it even more important to keep an active eye on your investments: (1) You will probably begin withdrawing from investments and will likely need to manage the ongoing liquidity of at least a portion of your investment accounts and (2) You have an ongoing shorter time horizon and less tolerance for risk.

3. Social Security - It is likely that in pre-retirement planning you may have talked in general about what you might do with your Social Security and which strategy you might implement when you reach full retirement age (which is 67). However, once you reach retirement, the rubber hits the road, and you need to navigate all of the available options and determine the best strategy for your situation – not necessarily something you want to do on your own without guidance.

4. Health Insurance and Medicare - It’s a challenge for clients retiring before age 65 who have employers that don’t offer retiree healthcare. There’s often a significant expense surrounding retirement healthcare pre-Medicare.

For those under their employer healthcare, switching to Medicare is no small task – there are complications involved in “getting it right” by ensuring that clients are fully covered from an insurance standpoint once they get to retirement.

5. Life Insurance and Long-Term Care Insurance - Life and long-term care insurances are items we hope to have in place pre-retirement. Especially since the cost and the ability to become insured becomes incredibly difficult, the older one gets. However, maintaining these policies, understanding them, and having assistance once it comes to time to draw on the benefits is quite another story.

6. Estate and Multigenerational Planning - It makes sense for clients to manage their estate planning even after retirement and until the end of their lives. It’s the best way to ensure that their wealth is passed on to the next generation in the most efficient way possible. This is partly why we manage retirement income so close (account titling, beneficiaries, and estate documents). We also encourage families to document assets and have family conversations about their values and intentions for how they wish their wealth to be passed on. Many planners can help to structure and facilitate these kinds of conversations.

7. Planning for Aging - For many clients just entering retirement, one of their greatest challenges is how to help their now elderly parents manage the aging process. Like how to navigate the health care system? How to get the best care? How to determine the best place to live as they age? How best to pay for their care, especially if parents haven’t saved well enough for their retirement? How to avoid digging into your own retirement pockets to pay for your parents’ care? How to find the best resources in the community? And what questions to ask (since this is likely foreign territory for most)?

Since humans are living longer lives, there will likely be an increased need and/or desire to plan. In an emergency, it could be difficult to make a decision uninformed. A planner can help you create a contingency plan for potential future health changes.

While it seems like the majority of materials, time, and energy of the financial planning world focuses on planning to reach retirement, there is so much still to do post-retirement. Perhaps as much OR MORE as there is pre-retirement. Having the help of a planner in post-retirement is likely something you might not realize you needed, but something you’ll certainly be glad you had.

Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Sandra D. Adams and not necessarily those of Raymond James.

Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc.® is not a registered broker/dealer and is independent of Raymond James Financial Services.

2026 Social Security and Medicare Updates Announced

Contributed by: Kali Hassinger, CFP®, CSRIC™

It was recently announced that the Social Security benefits will receive a 2.8% Cost of Living Adjustment for 2026. 

For the average retiree, this adjustment translates to an increase of approximately $56 per month, raising the average monthly benefit from $2,008 to $2,064. The COLA adjustment will be reflected in recipients’ January 2026 Social Security payment.

Why the COLA Matters

COLAs are designed to help Social Security benefits keep pace with inflation. They’re calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which tracks the cost of everyday goods and services. However, this index doesn’t fully reflect the rising costs of essentials like healthcare, housing, and food, which tend to impact retirees more heavily.

Medicare Premiums

One key consideration is that Medicare Part B premiums are also increasing, projected to rise to $206.50 per month, which is a $21.50 increase from 2025. This means that while your Social Security check may be larger, a portion of that increase will be offset by higher healthcare costs.

Wage Base Increase: What It Means for Workers

For those still earning income, the Social Security wage base—the maximum amount of earnings subject to Social Security tax—will rise from $176,100 in 2025 to $184,500 in 2026, a 4.8% increase.

• Tax Rate: The Social Security tax rate remains at 12.4%, split evenly between employer and employee (6.2% each).

• Maximum Tax: This means the maximum Social Security tax per worker will increase by $1,041.60, totaling $22,878 in 2026.

This change affects higher-income earners and self-employed individuals, who should factor this into their tax planning and payroll budgeting.

Let’s Talk

If you’re wondering how these updates affect your personal situation—whether you're working, retired, or somewhere in between—we’re always here to help. Together, we can ensure your retirement plan is optimized for both income and tax efficiency.

Kali Hassinger, CFP®, CSRIC® is a Financial Planning Manager and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.

This material is being provided for informational purposes only and is not a complete description. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making a decision, and it does not constitute a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Any opinions are those of the author and not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. Prior to making a decision, please consult with your financial advisor about your individual situation.

Social Security Taxation

Contributed by: Nick Defenthaler, CFP®, RICP®

In my experience, there is typically a high level of confusion when it comes to understanding how Social Security benefits are taxed (consumers AND many financial advisors!). Understanding how other forms of income interact with Social Security is imperative when constructing a tax-efficient retirement income for a client. As we'll explore in this article, the impact other forms of income can have on Social Security can often make or break a financial planning/tax decision in a given year.

Social Security Tax Basics  

Are you ready for your head to spin? The taxation formula and application of this formula for Social Security benefits is tricky! Let's start with the formula for what's known as 'provisional income' or 'combined income.' An individual's provisional income will then determine how much of their Social Security benefit will be included in their overall income for the year.

• Adjusted Gross Income (AGI) + tax exempt bond interest + ½ Social Security benefit = Provisional Income (PI).

What income counts as AGI? Great question! Income from pensions, annuities, employment wages, dividends, interest, capital gains, and pre-tax 401k/IRA distributions would all be included in AGI.

• Provisional income less than $25,000 for single filers, $32,000 for joint filers = $0 tax paid on Social Security benefits.

• Provisional income between $25,000 - $34,000 for single filers, $32,000 - $44,000 for joint filers, up to 50% of Social Security benefits will be taxable.

• Provisional income above $34,000 for single filers or above $44,000 for joint filers, up to 85% of Social Security benefits will be taxable.

Provisional Income Example

As you can see, there are many moving parts, so let's look at an example. Mark and Jenny have a pension income of $40,000, distribute $36,000 each year from their Traditional IRAs, and recently started their Social Security benefits, which total $50,000. To determine their provisional income, we would complete the following calculation:

$76,000 AGI (pension + IRA distributions) + $0 tax exempt bond interest + $25,000 (50% of total Social Security benefits) = $101,000 of provisional income.

Given $101,000 of income, $42,500 (or 85%) of Mark and Jenny's Social Security combined benefit of $50,000 will be included in their income for the year.

• Pension = $40,000

• IRA Distributions = $36,000

• Social Security = $42,500

• Total Adjusted Gross Income = $118,500

The IRS has a great resource on its website that will help you calculate your provisional income and help forecast the taxability of your Social Security benefit – click HERE to check it out.

Reducing Tax on Social Security

As you can see from the example above, increasing one's provisional income will inevitably increase the taxability (and possibly the rate of tax) of one's Social Security benefit. The timing of realizing income such as capital gains, IRA distributions, or Roth IRA conversions is all important when creating a well-thought-out income plan that takes Social Security taxation into consideration.

We have seen many examples before where, on the surface, a Roth IRA conversion appeared to make sense for a client, given their current tax bracket. However, after running the numbers and seeing how much their provisional income would increase as a result of the conversion, we ultimately advised against converting funds to Roth. In many cases, the increased taxability on Social Security benefits diminishes the value of a Roth IRA conversion and can even be the source of increasing one's Medicare premiums and subject you to 'IRMAA' (Click HERE to read one of my past articles on this topic).

The impact of taxes on Social Security is a very important aspect of your retirement income plan. There are multiple 'push and pulls' when determining how much tax you'll pay on your benefit. While quite confusing, it's critical your advisor understands these nuances to help ensure your retirement income stream is as tax efficient as possible!

Nick Defenthaler, CFP®, RICP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® Nick specializes in tax-efficient retirement income and distribution planning for clients and serves as a trusted source for local and national media publications, including WXYZ, PBS, CNBC, MSN Money, Financial Planning Magazine and OnWallStreet.com.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Center for Financial Planning, inc. is not a registered broker/dealer and is independent of Raymond James Financial Services. Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Neither Raymond James Financial Services nor any Raymond James Financial Advisor renders advice on tax issues, these matters should be discussed with the appropriate professional. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Nick Defenthaler and not necessarily those of Raymond James.

If You’re a Single Woman, These Are the Top 5 Things to Plan for Prior to Retirement!

Contributed by: Kali Hassinger, CFP®, CSRIC™

Retirement planning comes with its own unique set of opportunities and challenges. When you're a single woman, deciding to retire and the many subsequent decisions surrounding that life change can feel like it presents even more anxiety. Focusing on a few key areas to optimize your financial future can help ease these doubts and ensure you make the right financial choices. Here are the top five items to plan for as you consider retirement:

1. Build and maintain a Diversified Investment Portfolio

Throughout your career, you've successfully built your retirement savings pool. When you're working and living off of your income, it can be easier to weather the market's ups and downs. When your portfolio is needed to provide income for your lifestyle and well-being, the stakes are a bit higher. Building a balanced portfolio that aligns with your risk tolerance, time horizon, and retirement goals is extremely important. With those guidelines in mind, your investment portfolio should be well-diversified across various asset classes, sectors, and geographical regions.

2. Understand your Budget, Expenses, and Lifestyle Needs

At all stages of our lives, having a budget and understanding of spending is important. When making the decision to retire, you'll want to plan for both current and future expenses. Women often have longer life expectancies than men, meaning their savings need to last longer in retirement. A detailed budget and retirement spending projection can help you determine if you've saved enough to have a financially confident retirement.

3. Create a Comprehensive Withdrawal Strategy

A well-thought-out withdrawal strategy can help preserve your portfolio and ensure it lasts throughout your lifetime. One common approach is the "bucket strategy," where you segment your savings and portfolio into different buckets or investments based on when you will need to use the money. When working with clients, we recommend keeping approximately 12 months of your portfolio income need in cash or low-risk, cash-like positions that are not subject to market volatility. Beyond that 12-month need, your ability to handle risk can vary.

Your withdrawal strategy should also incorporate and consider the tax implications of your withdrawals to avoid unforeseen tax burdens.  Strategic tax planning can also help to extend the life of your portfolio.

4. Develop an Estate Plan

Estate planning is often overlooked, but it's one of the most critical steps in helping to ensure that your assets are distributed according to your wishes. Whether you choose family or charitable causes, deciding how your savings and possessions are handled can avoid unnecessary stress for your loved ones.

Without a spouse who would be the default decision-maker in a situation where you cannot make them yourself, it's extremely important to ensure that you've appointed a power of attorney for financial or healthcare decisions.

5. Understand your Social Security Benefits

For many, Social Security is the only fixed source of income in retirement, and the decisions are often irrevocable. As a single person, you'll want to optimize the Social Security benefits available to you. Although you can collect as early as age 62, your benefit will be higher if you collect at your full retirement age or even as late as age 70. A financial planner can help you determine the best strategy for you based on your assets, life expectancy, and retirement goals.

As retirement approaches, it's natural to feel overwhelmed by the decisions that need to be made. Working with a financial planner can provide you with the expertise and personalized advice to feel confident in your financial future. It can also provide a partner you can trust with any of life's financial decisions.

Kali Hassinger, CFP®, CSRIC® is a Financial Planning Manager and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Kali Hassinger, CFP®, CSRIC™ and not necessarily those of Raymond James.

Prior to making an investment decision, please consult with your financial adviser about your individual situation. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc®. Center for Financial Planning, Inc.® is not a registered broker/dealer and is independent of Raymond James Financial Services.

Social Security Cost of Living Adjustment for 2025 and other Social Security Tax Updates!

Contributed by: Kali Hassinger, CFP®, CSRIC™

It was recently announced that the 2025 Cost of Living Adjustment for those receiving Social Security will be 2.5%. This amount reflects a steady decline from the 8.7% increase received in 2023 and the 3.2% received in 2024. The Cost of Living increase is calculated based on data from the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, from October 1st, 2023, through September 30th, 2024.

The Social Security taxable wage base will increase in 2025 from the current $168,600 to $176,100. This means employees will pay 6.2% of Social Security tax on the first $176,100 earned. That translates to $10,918 in tax paid for Social Security alone. Employers match the employee amount with an equal contribution. The Medicare tax remains at 1.45% on all income, with an additional .9% surtax for individuals earning over $200,000 and married couples filing jointly who earn over $250,000. This income level at which the surtax comes into play has remained unchanged since 2013. 

For those collecting Social Security, the taxable portion of their benefit can range from 0%, 50%, or 85% based on income:

• For those filing single: If taxable income is between $25,000 and $34,000, they may have to pay income tax on 50% of their benefits. If income is more than $34,000, up to 85% of their benefits may be taxable.

• For those filing a joint tax return: If combined income is between $32,000 and $44,000, they may have to pay income tax on up to 50% of their benefits. If joint income is more than $44,000, up to 85% of their benefits may be taxable.

Medicare premium and IRMAA (Income-Related Monthly Adjustment Amounts) updates are typically released later in the year, so keep an eye out for that update if you’re already collecting Social Security and enrolled in Medicare.

For many, Social Security is one of the only forms of guaranteed fixed income that will rise throughout retirement. The Senior Citizens League estimates, however, that Social Security benefits have lost approximately 33% of their buying power since the year 2000. This is why, when running retirement spending and safety projections, we factor an erosion of Social Security’s purchasing power into our client’s financial plans. If you have questions about your Social Security benefit or Medicare premiums, we are always here to help!

Kali Hassinger, CFP®, CSRIC® is a Financial Planning Manager and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of the author and not necessarily those of Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

Will Social Security Run Out in The Next 10 Years?

Contributed by: Kelsey Arvai, CFP®, MBA

Contributed by: Nick Errer and Ryan O'Neal

No, social security won't run out, at least not entirely. As a result of changes to Social Security enacted in 1983, benefits are expected to be payable in full until 2037. When these reserves are used up, continuing tax revenues are expected to pay 76% of scheduled benefits. What is causing the financial status of the Social Security Fund to shortfall? Americans have fewer children, live longer, and have an aging population of Baby Boomers retiring at a record pace, further lowering the workforce.

Many discussions have surfaced about how Congress will address the issue of an insolvent Social Security fund. Because we are currently in an election term, it is unlikely that any immediate action will be taken, but these are likely the eventual options on the table, barring any other creative solutions.  

Payroll Taxes may increase. The current Social Security tax rate is 12.4%. For most Americans who are W2 employees, this is split 50/50 between the employer and employee. An increase of 1% for both parties would bring the total rate up to 14.4% and substantially improve the program's state.  

Retirement age may have to go up. There have been no significant changes to the Social Security Program since the full retirement age was lifted from 65 to 67 in 1983. Since then, the average life expectancy in the United States has risen from 74.6 to 77.5 years old. A slight increase in the full retirement age represents how much longer people live today. Another increase would extend the fund substantially.

Benefits may get cut. Like any other struggling budget, there are two ways to fix it. One can either increase revenues or decrease spending. Rather than increasing revenue via payroll taxes to improve the state of the Social Security Fund, policymakers may decide to lower the maximum benefit individuals may receive. While this option would face scrutiny in the current high-price environment, it is certainly on the table.

In today's political environment, it is astute to structure your retirement portfolio to accommodate at least 30 years of retirement or longer. You can do this by creating a savings plan and choosing the right mix of investments (also known as a portfolio allocation). Individuals may rely on several fixed income sources besides Social Security in retirement, such as annuities, pensions, rental properties, or other recurring sources. Maintain at least one year of cash in a relatively safe, liquid account, such as an interest-bearing bank account or money market fund. Next, create a short-term reserve in your investment portfolio equivalent to two to four years' worth of living expenses, accounting for regular income sources or not, depending on how conservative you are. Invest the rest of your portfolio in investments that align with your goals and risk tolerance. The overarching goal here should be to hold a mix of stock, bond, and cash investments that can generate growth, provide income, and preserve your capital—balancing retirement income between social security and other income streams to create a more reliable financial future. Are you looking to implement a retirement income strategy? Reach out to us!

Sources:
https://www.ssa.gov/policy/docs/ssb/v70n3/v70n3p111.html  
https://www.investopedia.com/ask/answers/071514/why-social-security-running-out-money.asp  

Kelsey Arvai, MBA, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® She facilitates back office functions for clients.

This information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of the author and are not necessarily those of RJFS or Raymond James. Every investor’s situation is unique, and you should consider your investment goals, risk tolerance and time horizon before making any investment or investment decision. Investing involves risk and you may incur a profit or a loss regardless of strategy selected. Past performance is no guarantee of future results. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

Social Security Cost of Living Adjustment for 2024 and other Fun Social Security Facts!

Contributed by: Kali Hassinger, CFP®, CSRIC™

It was recently announced that the 2024 Cost of Living Adjustment for those receiving Social Security will be 3.2%. This is a far cry from the 8.7% increase received for 2023, but inflation, although remaining a common topic of conversation, has slowed over the last twelve months. The Cost of Living increase is calculated based on data from the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, from October 1st, 2022, through September 30th, 2023.

The Social Security taxable wage base will increase in 2024 from $160,200 to $168,600. This means that employees will pay 6.2% of Social Security tax on the first $168,600 earned, which translates to $10,453 of Social Security tax. Employers match the employee amount with an equal contribution. The Medicare tax remains at 1.45% on all income, with an additional .9% surtax for individuals earning over $200,000 and married couples filing jointly who earn over $250,000. This income level at which the surtax comes into play has remained unchanged since 2013. 

For those collecting Social Security, the taxable portion of their benefit can range from 0%, 50%, or 85% based on income: 

• For those filing “individual” and their combined income is between $25,000-$34,000, they may have to pay income tax on 50% of their benefits, and if more than $34,000, up to 85% of their benefits may be taxable.

• For those filing a joint tax return whose combined income is between $32,000 and $44,000, they may have to pay income tax on up to 50% of their benefits, and if more than $44,000, up to 85% of their benefits may be taxable. 

For many, Social Security is one of the only forms of guaranteed fixed income that will rise over the course of retirement. The Senior Citizens League estimates, however, that Social Security benefits have lost approximately 33% of their buying power since the year 2000. This is why, when working on running retirement spending and safety projections, we factor an erosion of Social Security’s purchasing power into our client’s financial plans. If you have questions about your Social Security benefit or Medicare premiums, we are always here to help! 

Kali Hassinger, CFP®, CSRIC™ is a Financial Planning Manager and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of the author and not necessarily those of Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.