Social Security’s Big Cost of Living Increase (COLA) Means MORE Taxes to Pay

I just turned 70…

Which means I’ll be receiving a special “birthday gift” from Uncle Sam for the first time.

Yes, I’m talking about my first Social Security check.

Even though I could’ve started taking Social Security eight years ago, I decided to wait until now since I’m still working and don’t need the money now.

Which is great because now I’ll get the maximum amount possible.

So, I’m glad I waited…

And I was even happier when I heard that in January, we’ll see an 8.7% increase in our Social Security checks with the cost-of-living adjustment (COLA) – the largest increase since 1981.

On the surface that sounds like great news, right? I mean, who wouldn’t want a bigger Social Security check?

However, the devil is in the details, especially when it comes to retirement income, government benefits, and taxes!

Yes, the same hand that giveth, also taketh away…

Many people aren’t aware that it’s common to owe taxes on your Social Security benefits. Currently, if a couple makes over $32,000 (from retirement account withdrawals and other sources), 50% of their Social Security income gets taxed.

If a couple retires with an income above $44,000, up to 85% of their Social Security benefits are taxed!

I know this doesn’t sit well with many of the retirees we work with. I hear it all the time:

“What? You’re telling me all those mandatory contributions I was forced to make to the government for all my working years are also going to be taxed in retirement?!”

Yes. Unfortunately, that’s our reality.

But it wasn’t always like this…

You see, Social Security benefits weren’t taxed initially. But in 1983, Congress decided that up to 50% of benefits could be included in taxable income. Later, they raised the percentage to 85% for higher-income folks.

Plus, when the government introduced these changes to Social Security in the 1980s, they made a big mistake: they completely ignored the impact of inflation.

In other words, they did not index the thresholds to inflation. This means that tax bills get higher as inflation gets higher each year.

This “government goof” has hurt millions of Americans. When this was introduced, only 10% of Americans broke the income thresholds that require tax payments on their Social Security benefits.

Today over 50% of Americans pay taxes on their Social Security benefits. And this big cost of living increase will only bump millions more people into an income bracket where they’ll also owe taxes on their Social Security.

Taxes On Social Security Benefits Are Just the Tip of The Iceberg

Your Social Security benefits aren’t the only taxable income you have to worry about… a higher taxable income can make your Medicare premiums go up, too.

I know… I know… I’m full of good news today, aren’t I?

But this is important for you to know…

The IRS uses income reported on your federal tax return to determine the size of your Medicare premium payments. And a big cost-of-living increase, like the one happening in two months, can bump you into a higher premium payment. That can mean up to a 350% increase on premium payments.

But Wait, There’s More (Taxes!)

As you know, you also have to pay income tax on withdrawals from any tax-deferred accounts, investments or pensions. This includes any withdrawals you take from traditional IRAs, 401(k)s, 403(b)s and similar government-controlled retirement plans, and tax-deferred annuities.

So to recap…

  • The 8.7% cost-of-living-adjustment (COLA) increase on Social Security will knock millions of seniors into a higher tax bracket
  • The COLA may also trigger higher Medicare payments
  • The IRS will continue to take a big tax bite out of your traditional 401(k) and IRA retirement account withdrawals

After all that, how much money will you actually have left over to live on in retirement?

For many, the answer is “not enough.”

Fortunately, There’s a Better Way…

There’s a way to structure your retirement income to minimize or even eliminate all these hefty taxes and costs. And this is something a highly trained Bank On Yourself Professional specializes in.

It’s called the Bank On Yourself safe wealth-building strategy, and it allows you to:

  • Pay your taxes up front… so you legally pay ZERO taxes on your retirement income (no nasty surprises like the ones mentioned above) https://www.bankonyourself.com/bank-on-yourself-tax-advantages.html
  • Legally avoid paying capital gains tax (because a Bank On Yourself plan isn’t considered an investment)
  • Take income in retirement that’s essentially “invisible” to the IRS when they calculate how much taxes you’ll owe on your Social Security benefits (unlike the income you take from a 401(k), 403(b), or IRA)
  • Also potentially reduce your Medicare premiums by up to two-thirds since the income from your Bank On Yourself strategy will not make your premiums go up

Get a Free Analysis To Help You Avoid These Surprise Retirement Taxes

If you’re interested in learning more about how adding the Bank On Yourself strategy to your financial plan can help you KEEP more of your hard-earned money, just click the link below to schedule a FREE, no-obligation Analysis today:

REQUEST YOUR
FREE ANALYSIS!

Simply answer the questions on that page and a Bank On Yourself Professional will be in touch with you to show you how you can legally protect your retirement income from being taxed. They can also show you how a Social Security “bridge” strategy can enable you to use other assets to delay taking Social Security until as late as age 70, when you can claim your largest possible benefit.

Since I’m in a nostalgic mood lately because of my birthday, I’ll leave you with one of my favorite quotes…

Are “Termites” Destroying Your Financial Foundation?

Chomp… Chomp… Chomp…

That’s the sound of termites destroying your financial foundation.

But most people aren’t aware it’s happening. And it’s claiming more victims than you might think.

Of course, you’re aware of how inflation is eating away at the value of your dollars. You feel it at the grocery store, the gas station, when you pay rent, and just about everywhere you look.

But, if, like many Americans, you own a term insurance policy, personally or through your workplace, it might not even be worth the paper it’s printed on when you need it.

Inflation has been running at a 40-year high, currently around 9% per year. But let’s say the Federal Reserve gets it right and brings inflation down to 4% annually in the next few years.

Imagine that you have a $500,000 20-year term policy. In the event of your death, the benefit your loved ones would receive will lose up to 56% of its purchasing power.

[Read more…] “Are “Termites” Destroying Your Financial Foundation?”

Shaky Economy Stressing You Out? Here’s What to Do…

Feeling like a deer in the headlights right now? You’re not alone! Soaring inflation, stock market crashing, a pandemic that just won’t go away – and the only light at the end of the tunnel looks like the oncoming train of recession! We’re all getting squeezed from both ends…

It’s costing you 60% more than last year to fill up your gas tank.

Last month, you thought about buying a new home. This month mortgage rates have priced you totally out of the market.

Global supply chain glitches mean that things you bought all the time are almost impossible to find. (Seriously, a sriracha hot sauce shortage?!?)

Your low-interest charge cards are projected to average 20% in a couple of months – and the high-interest rate ones will be off the charts.

A few months ago, you were sitting on your big, juicy 401(k) or IRA and thinking of early retirement. Now, you’re praying they’ll let you keep your job when you’re 82.

Not long ago, you looked at your retirement account balance and felt euphoric. A humongous asteroid could be heading toward earth and the market would still go up! I can relate. [Read more…] “Shaky Economy Stressing You Out? Here’s What to Do…”

How to Shield Yourself from Market Volatility, Inflation and Interest Rate Woes

Stock market volatility has returned with a vengeance, as this chart of the Dow over the last 3 months starkly illustrates.

We’re facing a whirlwind of economic challenges we have little or no control over. Here are the top 5 currently contributing to the volatility:

Challenge #1: Inflation has hit a 40-year high

That’s hammering consumers, wiping out pay raises, and reinforcing the Federal Reserve’s decision to rip off the band-aid and raise borrowing rates multiple times this year alone, which some economists fear will trigger a recession.

Challenge #2: The pandemic and rock bottom interest rates pushed home prices up at a head-spinning rate

[Read more…] “How to Shield Yourself from Market Volatility, Inflation and Interest Rate Woes”

How to Avoid Depleting Your Retirement Nest Egg

The #1 retirement fear of Americans is running out of money. AARP reports that 50% of Americans share that fear.

And with good reason, because the average 65-year-old (the average retirement age in the US is 61) will outlive his or her savings by almost a decade, according to the World Economic Forum. Unfortunately, many will be forced to choose between putting food on the table or paying for life-saving medicine and may end up being dependent on their children.

We spend our working years hustling to build up our retirement nest egg. We assume that when we retire, we’ll supplement Social Security by withdrawing some of the principal. But no one can give us surefire guidance on how much we can safely take from our nest egg each year. In fact, William Sharpe, winner of the 1990 Nobel Prize in Economic Sciences, said retirement income planning is “the hardest and nastiest problem in finance.”

How long will your money last in retirement?

[Read more…] “How to Avoid Depleting Your Retirement Nest Egg”

Retirement Plan Unpredictability is a Major Wealth Killer

I have written at length about my research into the wealth-killing traps of 401(k)s, IRAs, 403(b)s, and Roth plans… and how to avoid them.

In this post, I’m going to talk about the trap of retirement plan unpredictability, and I’ll start by asking you a critical question:

Do you know what the value of your retirement account(s) will be on the day you plan to tap into them… and in 20 or 30 years?

If your answer to that question is “no,” then you don’t have a plan – you’re gambling.

Yet isn’t the money you’ve earmarked for retirement money you can’t afford to lose? On top of all of life’s stresses, do you really want to have to worry about when the next market crash could wipe out 50% or more of your life’s savings – as has happened twice just since the year 2000?

Market Volatility Has Proven to be a Cause of Health Problems and Even Early Death

[Read more…] “Retirement Plan Unpredictability is a Major Wealth Killer”

Tax Deferral is a Scam and Here’s Proof

Tax deferral is a con, and I’m going to prove it to you.

Actually, I’m going to let you prove it to yourself, with this 5-second experiment.

The conventional wisdom says, “Maximize your contributions to tax-deferred plans, like 401(k)s, IRAs and 403(b)s. Your money compounds without being reduced by taxes, and you’ll end up with more money during retirement.”

But is it really true?

The Society of Actuaries says that if the tax rates are the same, “It doesn’t make any difference whether [the taxes] are taken away from you at the beginning (tax-exempt) or at the end (tax-deferred). It’s the same fraction of your money that is left to you.”

But most people look at their savings and think it’s all theirs. You may have forgotten you’ll owe the IRS the taxes you deferred all those years – on every penny you’ve put in and every penny of growth.

If the tax rates miraculously manage to be lower during your retirement, you might come out ahead by deferring your taxes. But where do you think tax rates are headed long term? You must consider what tax rates might be during a retirement that could last 30+ years. [Read more…] “Tax Deferral is a Scam and Here’s Proof”

When Does Taxation Become Theft?

In his first 100 days in office, President Biden unveiled three colossal spending packages earning him the nickname, “The Six Trillion Dollar Man.”

Biden and Congress are just getting started with the most massive expansion of government since FDR’s New Deal during the Great Depression. Apparently, it’s desperately needed, even though the pandemic-caused recession is over.

This is a government that is notorious for wasting hundreds of billions of our hard-earned dollars every year. Think $518,000 to study how cocaine affects the mating habits of Japanese quails, $998,798 to ship two 19-cent washers from one state to another… and the list goes on. You couldn’t make this stuff up if you tried!

And let’s not forget this is a government with a long history of not being able to make much of a dent in controlling fraud and abuse. The government admits that more than $134 billion of improper Medicare and Medicaid payments were made in 2020 alone – and that’s just one government agency. [Read more…] “When Does Taxation Become Theft?”

6 Ways to Protect Yourself from Taxmageddon

Updated March, 2022

Our national debt now exceeds the size of the entire U.S. economy, doubling just in the last decade. And it’s growing at a rate that will make your head spin, as a quick glance at the U.S. Debt Clock reveals:


The Congressional Budget Office (CBO) says this deserves attention because…

Americans will be paying for this for decades.”

Which Means that Higher Taxes are Inevitable and You Must Take Action TODAY to Protect Yourself from the Coming Tax Tsunami!

And the reality is that they can’t possibly raise enough revenue taxing just the “wealthy.”

Did you know that, according to the most recent data available, if you make $69,007 or more, you’re in the top 25% of wage earners? And if you make $118,400 or more, you’re in the top 10%.

As nice as it may sound to be in the top 10% or even the top 25%, it also means you’ve got a giant target on your back when the government is looking for more revenue to cover its obligations.

There are little-known, but legal ways to protect yourself from this tax tsunami, under current tax law. This article explains what you need to do today to shield yourself from some very unpleasant tax surprises down the road.

(Download a FREE Special Report that Reveals How to Bypass Banks and Wall Street, Gain Control of Your Money and Shield Yourself from the Coming Tax Tsunami) [Read more…] “6 Ways to Protect Yourself from Taxmageddon”

How to Trade In Your 401(k) for an Increasing Guaranteed Income for Life

Jason is 53 years old and just changed jobs. He’s facing two retirement planning dilemmas…

  1. He has $830,000 in his 401(k) from his previous job and wants to move it where it gives him more guarantees that he and his wife, Julie, won’t outlive their money in retirement.
  2. He had been putting $19,000 a year into his old 401(k) and wants to continue socking away that much. But in the last couple of years he experienced several downsides to 401(k)s that have soured him on the idea of continuing down that path.

The Five 401(k) Drawbacks Jason Discovered…

Drawback #1: When the pandemic hit, Jason’s employer stopped doing any matching contributions, which had been a big incentive for him. He’d forgotten the employer match isn’t guaranteed.

Drawback #2: As Jason gets closer to retiring, he has much less of an appetite for risk and volatility. What if the market crashes again shortly before he plans to retire in 14 years at age 67?

He’d been saving diligently in a 401(k) for 29 years already, and his average annual return had been less than 6%! Sheesh! All those sleepless nights and heart-stopping crashes… for less than 6% a year?!? He wondered if a monkey throwing darts couldn’t have done better than that… [Read more…] “How to Trade In Your 401(k) for an Increasing Guaranteed Income for Life”