Social Security Facts and Considerations for Self-Directed IRA Owners

Self-Directed IRAFor many years, Self-Directed IRA owners, retirement planners and observers have referred to good retirement plans as “three-legged stools.” The structure is stable and mutually supporting, but if you take away one of the legs, the whole structure becomes unstable and the stool (and the retiree) is likely to come crashing down.

The three “legs” to which they refer are: Pensions, private savings and Social Security. Given the potential for instability, it is wise to add Self-Directed IRAs as a fourth leg to ensure that your retirement funds remain stable even if one of the other three legs gives out.

Over the last generation or two, however, we’ve seen private pensions evaporate for most Americans. Which means that private savings and Social Security are taking on even more critical importance. But pay careful attention to how to get the most out of your Social Security benefits.

  • Up to 85 percent of Social Security benefits may be taxable. It’s a question of your income in any given year in which you receive Social Security benefits. Here’s how it breaks down under current law:

For single filers, you may have to pay taxes on 50 percent of your Social Security income if your combined income (That is, your AGI + nontaxable interest + ½ of Social Security benefits) is $25,000 and $34,000. If your income is over $34,000, you may have to pay taxes on up to 85 percent of your benefits.

Self-Directed IRAFor married couples filing jointly, you may have to pay taxes on 50 percent of your combined Social Security benefits if your income is between $32,000 and $44,000. If your income is over $44,000, up to 85 percent of benefits may be subject to income tax.

Keep that in mind when mapping out your retirement plan. The more money you take in ordinary income from a Roth IRA, the more you may have to pay in taxes on Social Security, in addition to the tax normally due on traditional IRA (or 401(k), SEPs or SIMPLE IRAs.

  • Self-Directed IRAEvery month you wait means higher benefit levels. Most people know that you can get higher benefits if you wait until full retirement age than you can if you take benefits when you first become eligible. The benefit increases by about 8 percent per year for every year you are able to delay taking benefits. In some cases people have little choice in the matter. But every month you can afford to wait before you take Social Security benefits actually translates into a slightly higher benefit amount per month. On the other hand, if you are in poor health, or you have reason to believe your life expectancy will be shorter than the average, it may make more sense to take Social Security benefits as soon as you can. It also doesn’t make sense to wait until after ‘full retirement age’ to take benefits. Every situation is different.
  • Unemployed? If you qualify, you can collect unemployment benefits, even while you’re on Social Security benefits. According to the Social Security Administration, unemployment benefits do not count against your Social Security income. However, your Social Security or other income may offset and reduce your weekly unemployment insurance benefits.
  • You may not get your full Social Security benefit. According to the Social Security Administration, once we get out to about the year 2030, the portfolio of bonds in the Social Security Trust Fund will only support about 75 percent of promised benefits. Something will have to give: Congress must tax others to make up the difference, they will have to raise the retirement age, lower benefits, privatize the fund in hopes of earning a greater return (and increasing risk), or some combination of the above. Your self-directed IRA and other retirement savings are critical factors in how successful you will be in weathering the coming demographic and fiscal challenges that the Social Security system will face.

[tweetthis twitter_handles=”@iraexpert” hidden_hashtags=”#SelfDirectedIRA”]Given the potential for instability-it is wise to add Self-Directed IRAs[/tweetthis]

American IRA, LLC is here to help you face those challenges. With thousands of successful clients, coast to coast, American IRA is among the leading administrators of self-directed IRA accounts. If you are interested in alternative IRA strategies, visit our extensive online library at, or call us today at 866-7500-IRA(472).







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