taxable social security benefits and Roth IRAs | Ed Slott and Company, LLC

taxable social security benefits and Roth IRAs

If you convert to a Roth IRA, it reduces your AGI/MAGI. Does this mean you could pay less taxes on Social Security benefits? thanks kathy

Yes, it could result in a lesser amount of SS being included in AGI. However, most people that convert expect to be in a medium to high tax bracket in retirement without the conversion and every year the modest AGI threshold for SS taxation erodes due to inflation. With the deficit, there is little hope that the MAGI for SS inclusion will ever be adjusted for inflation and it catches more retirees each year. But if one's main asset is a pre tax retirement plan, converting will reduce RMDs and perhaps result in a reduction of the amount of taxable SS benefits. A similar scenario also applies to the Medicare Part B premium surcharge, but at a much higher MAGI level. Of course, in the year the conversion is done, MAGI peaks and could aggravate these two taxes, but there might be savings in the long run. This should be looked at on a case by case basis.

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