Roth Accounts May Help You Keep More Social Security
Your retirement account choice can determine how much of your Social Security check Uncle Sam takes back. Here's what to know.
Most retirees don't realize that the type of retirement account they contribute to now directly affects how much of their Social Security benefits get taxed later. That's a big deal — and it's a mistake that's hard to unwind once you're already in retirement.
The core issue is something called "combined income" — the IRS formula that determines whether your Social Security benefits become taxable. Traditional 401(k) withdrawals count toward that combined income threshold. Pull out enough, and suddenly up to 85% of your Social Security benefit is on the table for the IRS.
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A Roth account flips the script. Qualified Roth withdrawals don't count toward your combined income calculation. That means you could fund your retirement lifestyle from a Roth and keep your taxable income low enough that your Social Security benefits stay largely — or even fully — untaxed. That's real money staying in your pocket every single month.
The trade-off is that you pay taxes upfront when contributing to a Roth instead of getting the traditional 401(k) deduction today. If you expect to be in a lower tax bracket in retirement, a traditional account might still win. But for many savers — especially younger workers in their peak earning years — the Roth math can work out dramatically in your favor over decades.
Strategic account selection isn't just about growth rates or employer matches. It's about engineering your future tax picture so you don't hand back benefits you spent a lifetime earning. Continue reading at fool (christy bieber).
