I’m trying to decide if I want to take the lifetime annuity or lump sum. I’ve learned our pensions are classified as qualified vs non qualified. Qualified means taxable non qualified means not taxable. Does social security consider your pension as income reducing your social security benefits if you exceed the maximum annual income threshold ?
22 replies (most recent on top)
They don’t have all the answers like some, might find a nugget or resource.
Why would you come on this forum and ask this question? Wow.
In response to the original question:
"Does social security consider your pension as income reducing your social security benefits if you exceed the maximum annual income threshold ?"
YES - Social Security considers your monthly payment pension as income. They also consider any withdrawals from a traditional IRA as income, and also any income from annuities or any other income except for qualified withdrawals from a ROTH IRA.
As far as reducing the payment you receive, that only applies if you are receiving social security payments before your full retirement age. Once you attain your FRA (full retirement age) that provision no longer applies...
That is the answer to your question if the amount you receive from Soc.Sec. would be reduced....
BUT WAIT, THERE'S MORE: many people think this is the same but it is completely different.
This tax provision is in effect even after you reach full retirement age and for the rest of your life, it is the provision to see if you will pay tax on your social security or not, and if taxable at what level...
As above, any monthly payment pension, traditional IRA withdrawals, annuity payments and any other income, PLUS half of your Social Security income for the year all added up will determine whether your Social Security is taxable, and if so at what level... Also, as above, ROTH IRA withdrawals do NOT count as income. BUT, conversions from a traditional IRA to a ROTH IRA do count as income.
The highest bracket is 85% of your social security is taxable, (does NOT mean that the tax on your soc sec is 85%, it means that if you hit the high bracket, 85% of your soc sec is taxable)..... So many people jump to conclusions on that, please re-read it several times.
The level to reach the highest bracket where 85% of your social security is taxable is not very high and if you elect to take your pension in the form of a monthly payment you will definitely be in that top bracket and for the rest of your life 85% of your social security will be taxed (unless the limits are raised, but, the limits have been the same since the 80's and no raise is expected).
There are ways around having to pay tax on your social security but if you elect a monthly payment pension you no longer have any ability to structure your way around those taxes.
It is far too much to go into here, and also everyone has slightly different factors in these calculations.
Seek out a good TAX advisor, (not investment advisor) to see how best to avoid as much tax as possible.
Good luck......
I took the pension because there are many people that take the lump sum and lose it all. In my 30s I had a lot of money with a brokerage firm and I was doing very good on my own. But I was talked into getting a financial advisor following his advice. I lost $150,000 in the 1st 6 months. The financial advisor does not care about you making money because they only care about how much fees they can charge you. When I retired in my 60s I again have a brokerage account. I refuse to have a financial advisor, but the brokerage tried to slam me 3 times by putting one in my account without my permission until I mailed them a threat to sue letter. I took a pension. It gives me a piece of mind knowing I get a monthly payment every month and the same with Social Security used to pay all my bills. Also I have a decent amount in my IRA & regular brokerage account and doing good so far. But I rarely pull out money from but when I do it is from my dividends.
Take the lump sum and invest in cryptocurrency. Get rich.
Your financial advisor will tell you take lum sum. But this is not always true and beneficial. Depends what pension plan you are on and how long you plan to live. In my case the annuity may be better option now, after the rates went up and I lost lots of money in lump sum calculation.
Take the money and run.
I retired 11/22 and was advised by Fidelity to take the pension and turn it into an IRA.
The maximum annual income threshold only matters if you collect benefits at an age prior to your full (social security) retirement age. So if you collect SS benefits at 62, any income that you have, including pension income, capital gains, etc., will count towards the "limit".
Wrong. Only earned income counts towards limit
Never, EVER, leave the Stink a dime of your $ to mismanage into oblivion. Take the lump, and if you like, put it in a better annuity than the Stink provides. Why give give Stink more of your hard earned $
I took the lump sum and rolled it into an IRA.
Why are you just pick up the phone and call your Social Security office?
SS, any AT&T pension, or any RMD (required minimum distribution if 72 or older) are all taxable income. The pension does not impact the amount of SS you receive but can impact the amount of SS that may be taxable. If you deposit the lump sum into a tax deferred IRA account only future RMDs are taxable at the time of withdrawal and might impact the amount of SS that is taxed at that time.
Look at the first page of form 1040.
The maximum annual income threshold only matters if you collect benefits at an age prior to your full (social security) retirement age. So if you collect SS benefits at 62, any income that you have, including pension income, capital gains, etc., will count towards the "limit". If you make up to or over that limit, your benefits will decrease. However, this all goes away once you reach your Social Security full retirement age. You can make as much money as you want- from pensions, another job, distributions from IRA, etc., and it won't impact your social security benefit amount. However, it may impact the amount of income tax that you may have to pay on your benefit. Sadly, social security benefits will be taxed as income at the Federal level (and also for some states) if certain formulas, which tend to be a bit complicated, are met. So if you don't want to fall into an unexpected tax bracket, or perhaps worse, pay "IRMAA" surcharges on your Medicare premiums, pay close attention to your income amounts, and which accounts you are drawing from. There is legislation afoot to eliminate the income tax on social security, but so far, nothing has passed yet.
“ You can take the lump sum and buy a better annuity.”
Care to provide more facts and examples?
Thanks
You can take the lump sum and buy a better annuity.
For Gods sake talk to a financial advisor.
Some States tax others don’t and the Fed always want “their” tax money. Incumbent upon you to read your State policy. I’d suggest that you make a free consultation appointment with a Fidelity agent, they are very familiar with AT&T retirement policies and options. You can locate the information on the Fidelity site when you log into your account or look under HR One Stop for the contact information.
Hope that information will assist you on your decision, Good Luck!
Yes. Your pension is considered income.
Social Security is taxable above a certain yearly income total. Unknown on the annuity.
Pension and social security are different and one does not affect the other.
There is no maximum income that would cause your age based social security to be reduced.
No