Tax planning for 2025 if retiring end of 2024 - Social Security taxation questions

Based on your numbers, there's a good chance part of your Social Security will be taxable federally. The IRS has a specific calculation for this. For married filing jointly, you need to take half your Social Security benefits ($18,750) and add it to your other income ($34,000 from your wife's job + any taxable interest). Since your Roth IRA withdrawals are generally tax-free, they don't count here. If this total exceeds $32,000, then some of your Social Security becomes taxable. With your numbers, you're likely over that threshold, so up to 85% of your benefits could be taxable. But don't panic - it doesn't mean 85% tax rate, just that percentage of your benefits gets added to your taxable income. For your wife's withholding - yes, she should definitely continue having taxes withheld. You could also consider making quarterly estimated tax payments if needed. TurboTax or other tax software can help you run these numbers more precisely. Just input your expected income and it'll give you a better estimate of what you'll owe.

I was exactly in your situation last year and found this amazing tool at https://taxr.ai that saved me so much stress. I was retiring and couldn't figure out how much of my Social Security would be taxable or how to handle my wife's income. The tool analyzed our entire situation and showed exactly how much of my SS benefits would be taxed. It also helped us optimize when to take distributions from different accounts to minimize our overall tax burden over several years. What really helped was seeing how different withdrawal strategies would affect our tax brackets year by year. We ended up timing some of our withdrawals differently than planned and saved thousands.

Just wanted to follow up - I tried the taxr.ai tool that was mentioned and it was exactly what I needed! It showed me that I was going to have about 67% of my Social Security taxed because of my pension income, which I had no idea about. The visualization really helped me understand how withdrawals from different accounts would affect my tax bracket. I ended up changing when I'm taking some distributions and it lowered my expected tax bill by almost $3,200 for next year. It also flagged that I should adjust my wife's W-4 since our combined income would put us in a different bracket than she was having withheld. Would definitely recommend for anyone retiring and trying to figure out the tax implications.

When I retired last year, I spent WEEKS trying to get through to someone at the IRS to answer my questions about Social Security taxation. Always busy signals or crazy long hold times. Then I found https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c. They actually get the IRS to call YOU instead of waiting on hold. I was skeptical but desperate. I used it and got a call back from an actual IRS agent in about 2 hours. She walked me through exactly how my Social Security would be taxed with my pension and my wife's part-time income. Got all my questions answered in one call instead of weeks of frustration.

Well I have to eat my words. After completely dismissing Claimyr, I decided to try it because I've been trying for THREE MONTHS to get clarification on my retirement withdrawal strategy. Got a call back from the IRS in just under 2 hours. The agent walked me through exactly how my Social Security would be taxed alongside my rental income and helped me understand what documentation I needed for some 1099-R distributions I had questions about. I've seriously never had such a smooth experience with the IRS. After years of spending entire afternoons on hold, this was absolutely worth it. Apparently they just wait on hold for you using some kind of automated system. Whatever it is, it works.

Here's something else to consider - Medicare premiums! If your combined income (including half of SS) goes over certain thresholds, your Medicare Part B and D premiums can increase substantially through something called IRMAA (Income-Related Monthly Adjustment Amount). For 2024, the first threshold for married filing jointly is $206,000. Doesn't sound like you're near that with the numbers you shared, but it's something to keep in mind if you ever decide to do larger Roth conversions or have other income sources.

Don't forget about Required Minimum Distributions! Since you mentioned only withdrawing from Roth accounts now, I'm assuming you might have traditional IRAs or 401ks too? Once you hit 73, you HAVE to start taking RMDs from those accounts, which could push more of your Social Security into taxable territory in future years. Might be worth considering some Roth conversions now if you're in a lower tax bracket.

Just a heads-up on PA taxes - while PA doesn't tax Social Security, they DO tax distributions from IRAs, 401ks and other retirement accounts (except military). Even if you paid PA tax on the money when you contributed, they tax it again when you withdraw. One of the few states that does this. Roth withdrawals are the exception since they're federally tax-free. So your strategy of using Roth money is smart from a PA perspective too!