SHOW NOTES: 2019-02-21 MiM

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Last Week’s Question of the Week: What percentage of new cars in the U.S. are currently being leased? Is it 10%, 30%, or 50% of all new cars?

ANSWER: Approximately 30% of new cars in the U.S. are currently being leased and were on lease in the first and second quarters of both 2017 and 2018.

HOST: Your subject today revolves around Social Security. One question that some people may have is if their collect social security benefit, will be taxable?

KLAAS FINANCIAL: Yes, many people new to receiving Social Security are surprised to learn that under certain circumstances, a portion of the money they receive from SS may be treated as taxable income, which means they’ll have to pay income taxes on it each year. This is especially common among those who continue working while receiving retirement benefits, as their earned income can take them above the income threshold at which the IRS starts taxing Social Security benefits.

Currently, almost 20 million people pay income taxes every year on a percentage of their Social Security retirement or disability benefits, and that number could rise steadily if the current laws governing benefit taxation go unchanged.

A little history as to how this came about since Social Security benefits were not always taxable. Originally when Social Security was created in 1935, and it began paying out monthly benefits in 1940, the Treasury Department issued specific tax rulings that made it clear that Social Security benefits were excluded at that time from federal income taxation. It was actually a surprising decision at the time because most private pension payments that retirees received had been at least partially taxable, even if employees’ contributions toward those pensions were subject to tax throughout their careers.

Social Security has the unique characteristic of getting its funding from both employee and employer contributions. Workers aren’t taxed on the money their employers pay in payroll taxes, so when retirees get their benefit payments, the portion that came from their employers’ tax payments should, arguably, be fully taxed, as it wasn’t previously included in the worker’s income.

When Social Security’s had its first funding crisis in the late 1970s and early 1980s…two advisory councils suggested reform which lead to a tax change on Social Security. In the end, the rules that lawmakers adopted in 1983 forced many Social Security recipients with earnings above a combined threshold to include some of their Social Security benefits in taxable income.

HOST: Who is taxed on their Social Security today, and how can I calculate this today?

KLAAS FINANCIAL: If your only income is from Social Security, your benefits likely aren’t taxable. But if you have other taxable income such as from a job — freelancing, a pension or withdrawals from tax-deferred retirement savings — then 50% or 85% of your Social Security benefits may be subject to federal income taxes.

To determine the percentage, calculate your “provisional income,” which is your adjusted gross income (not counting Social Security benefits), plus any nontaxable interest and half of your Social Security benefits. If that total is less than $25,000 if you’re single or $32,000 if married filing jointly, your Social Security benefits are not taxable.

If it’s between $25,000 and $34,000 on a single return or $32,000 to $44,000 on a joint return, then up to 50% of your Social Security benefits may be taxable.

If your provisional income is more than $34,000 on a single return or $44,000 on a joint return, 85% of your benefits may be taxable. This calculation, though, only applies to federal income taxes. Additionally, 13 states tax Social Security benefits.

HOST: I know one question everyone wonders about is when is the best time to start drawing on their SS benefit. What would you say is “the best time”?

KLAAS FINANCIAL: Well that depends on your overall financial situation. Some of the questions you need to explore are:

  • What type of debt do you have going into retirement? What are your income needs? Do you have a spouse who will also be collecting SS?
  • You need to understand what your “Full retirement age” or “normal retirement age” is. This is the age at which a person may first become entitled to full or unreduced retirement benefits from Social Security. Remember you may start receiving benefits as early as age 62 or as late as age 70. Born before 1954, FRA is 66; born between 1955-1959 it is 66 + some months; born after 1960, it is 67 years old.
  • If you are working, how much will you be earning? Perhaps it is worth waiting to collect. Remember, there is a limit to your income if you collect social security prior to your FRA which we will explain in a moment.
  • Understand that you could receive Delayed Retirement Credits of 8% up to age 70. If your full retirement age is 67, then your benefit could increase by 24%, if you wait till age 70 to begin collecting. There are no delayed retirement credits added on past age 70.

HOST: If I take my social security early, prior to Full Retirement Age what restrictions do I have to watch out for?

KLAAS FINANCIAL: The Social Security administration may reduce your benefits between the ages of 62 and full retirement age (66-67) if your total earned income is over $17,640 in 2019. BE CAREFUL of this! After that, $1 will be deducted from your payment for every $2 that exceeds the limit. The 2019 annual limit marks a $600 increase over 2018’s limit of $17,040.

There is no limit on earnings for workers who are “full” retirement age or older for the entire year. Also, if you have earned your own social security benefit, then You are entitled to ALL of your own social security benefit or 50% of your spouses (whichever is greater) in retirement. Be aware of age differences, etc.

HOST: How can I get a Social Security Statement that shows a record of my earnings and an estimate of my future benefits? And how soon should I apply for benefits?

KLAAS FINANCIAL: Just go to to set up your own personal Social Security Statement account. Also, check for accuracy of income reporting.

You should apply for retirement benefits three months before you want your payments to start. The easiest and most convenient way to apply for retirement benefits is by using the online application at

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Catch C.J. Klaas and Maleeah Cuevas on Money in Motion every Thursday on Madison's 1310 WIBA from 8:05-8:35am.