Allworth Advice | Do we have to pay taxes on our Social Security?

Every week, Allworth Financial’s Amy Wagner and Steve Hruby, CFP, answer your questions. If you, a friend, or someone in your family has a money issue or problem, feel free to send those questions to yourmoney@enquirer.com.

Greg and Laura in Mason: We’re both 59 and planning on taking Social Security in a few years. Do we have to pay taxes on that money?

Answer: Maybe. The IRS and Social Security Administration determine if you owe taxes on your benefit by looking at something called your ‘combined income’ (it’s sometimes also referred to as ‘provisional income.’) To get this number, you need to add together your adjusted gross income, any tax-exempt interest income, and half of your Social Security benefits.

Then, assuming the two of you file a joint tax return, if this combined income is more than $32,000, then yes, you will have to pay taxes on your benefit. How much? If your combined income is between $32,000 and $44,000, up to 50 percent of your benefits can be taxed; anything over $44,000 means up to 85 percent can be taxed.

As you can see, those thresholds are pretty low, meaning that any increases in your adjusted gross income can have a big impact on whether or not you are subject to these taxes. This is a big reason why forward-thinking tax planning can be a huge benefit as you prepare for retirement; for example, withdrawals from Roth accounts don’t count towards adjusted gross income.

The Allworth Advice is that you shouldn’t make your Social Security decisions in a vacuum; there are a lot of moving parts. A fiduciary financial advisor can help you blend your benefits with your other investments and retirement income.

Jeff in Bridgetown: My car insurance premiums have gotten ridiculous. Is there any way to pay less?

Answer: We feel your pain, too. (Especially Amy, who’s insuring three teen drivers!) And unfortunately, it’s one of those expenses that just keeps climbing. In fact, nationally, the average cost of full coverage increased by 26 percent over last year, according to new data from Bankrate.com. Why the jump? There are varying reasons, including higher inflation in general, an increase in severe accidents, and higher overall new car prices thanks to new technology and more specialized materials.

A little closer to home, that same data found that, in Ohio, the average 2024 annual premium is about $1,500, which is actually the twelfth cheapest among all states. (Kentucky is the seventh most expensive at $2,550 per year, while Indiana is closer to the middle of the pack at $1,600 per year.)

Unfortunately, you can’t control all the factors that determine your rate, such as location, population density, overall inflation rates, and even extreme weather. But you can control things like your driving history, vehicle type (anything expensive to repair will be expensive to insure), deductible (raising this will lower your premium), and even your credit score. Also check to see if you qualify for discounts, such as bundling other policies, having certain safety and anti-theft features, or participating in a safe driving program. Insurance comparison site The Zebra has even discovered that paying your full annual premium up front instead of monthly could save drivers as much as 12 percent on average.

Here's The Allworth Advice: You can pretty much assume that car insurance rates are going to keep climbing, even as inflation comes back down to earth. But remember, the cheapest policy isn’t always the best policy. If you start to shop around, make sure you’re comparing apples to apples – each quote you get should reflect the same deductible, limits and coverage.

Responses are for informational purposes only and individuals should consider whether any general recommendation in these responses are suitable for their particular circumstances based on investment objectives, financial situation and needs. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing, including a tax advisor and/or attorney. Retirement planning services offered through Allworth Financial a SEC Registered Investment Advisor. Securities offered through AW Securities, a Registered Broker/Dealer, member FINRA/SIPC. Visit allworthfinancial.com or call (513) 469-7500.

This article originally appeared on Cincinnati Enquirer: Allworth Advice | Do we have to pay taxes on our Social Security?