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Gains in a taxable account decrease SS?
Old 12-12-2017, 02:28 PM   #1
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Gains in a taxable account decrease SS?

Hi,

I am thinking of opening a taxable account at my broker with some money I have stashed away. If I have any gains in this account will it decrease my social security?
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Old 12-12-2017, 02:30 PM   #2
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Old 12-12-2017, 05:19 PM   #3
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How much are you talking about ?
Are you currently collecting SS, or are you 25 and thinking ahead ?
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Old 12-12-2017, 08:14 PM   #4
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If you are already drawing social security, gains could increase the percentage of the SS $$ subject to federal income tax; it could also increase your medicare rates via IRMAA. Worst case scenario, you still come out ahead though.
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Old 12-12-2017, 09:04 PM   #5
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It sure can but, as 2017ish noted, what's your alternative? Spend it all now and risk not having enough cash in retirement or save it and have your SS taxed? This year I'll pay about $3,800 more in federal and state taxes on my SS because I have income from after-tax investments. It sucks but I still have enough money left over in the budget for Business Class flights to Europe.
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Old 12-12-2017, 09:23 PM   #6
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Originally Posted by egleys View Post
Hi,

I am thinking of opening a taxable account at my broker with some money I have stashed away. If I have any gains in this account will it decrease my social security?
Earned income is needed to reduce SS payments prior to full retirement age. Earned income must be below about 16200 per year from 62 to 65 or they take back 1 for every 2 dollars over the annual limit. At 65, you get a larger hurdle(about 44000 from memory) before there is any hold back on SS. Earnings on investments do not count towards that limit.
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Old 12-12-2017, 10:07 PM   #7
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OP - The reason I asked my questions, is to prompt you to supply more information as with the limited information you provided, people will supply true answers based on what they assume your situation is like. Which could be the wrong answer for you.

For example I could put $3 Million dollars into a brokerage account and not reduce my SS, nor pay any additional tax for as long as I wanted... but this may not be the answer for you.
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Old 12-13-2017, 09:59 AM   #8
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Thanks for all the replies. I'm already collecting Social Security. I'm 65, wife is still working, and I'm getting a little bored. I started entertaining the possibility I'm going back to work for a couple more years. I have been educating myself on how to invest wisely. I'm doing okay in that Arena, and I think I could probably do a lot better. I've only been trading in my IRA. But I have a lot of cash stashed away for a rainy day, and started thinking about opening a taxable investment account, hence the question I originally posted. Since the investment gains will not count against my social security, it appears that I'm better off spending my time in better decisions on my investments. I'm about at the maximum I can receive in Social Security, so I wouldn't gain much in my SS payments by going back to work. I just wanted to make sure that investment gains would not impact my SS. Thanks very much for all your answers!
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Old 12-13-2017, 10:19 AM   #9
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Thanks for all the replies. I'm already collecting Social Security. I'm 65, wife is still working, and I'm getting a little bored. I started entertaining the possibility I'm going back to work for a couple more years. I have been educating myself on how to invest wisely. I'm doing okay in that Arena, and I think I could probably do a lot better. I've only been trading in my IRA. But I have a lot of cash stashed away for a rainy day, and started thinking about opening a taxable investment account, hence the question I originally posted. Since the investment gains will not count against my social security, it appears that I'm better off spending my time in better decisions on my investments. I'm about at the maximum I can receive in Social Security, so I wouldn't gain much in my SS payments by going back to work. I just wanted to make sure that investment gains would not impact my SS. Thanks very much for all your answers!
Note that once you reach full retirement age you can work as much as you like and it does not affect social security payments. (Actually takes effect the month you reach (in your case) 66.) Since your already 65 it would not be a long wait. BTW if you don't have 35 years of credit with SS and earn enough for SS credit your benefit would increase in future years.
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Old 12-13-2017, 11:18 AM   #10
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"Investment gains" fall into two categories- realized and unrealized. An example of unrealized- I own a lot of Berkshire. It doesn't pay dividends and the value just keeps growing. As long as I don't sell it, it has no effect at all on my taxable income.

Examples of realized gains and other realized investment income: actually selling Berkshire stock, mutual fund capital gains distributions (they have to distribute their gains at year-end and you have no control over the amount), dividends paid by stocks or mutual funds. Income in this category in an after-tax account MAY make part of your SS taxable if it brings your Adjusted Gross Income up over certain levels. Not the same as the decrease you get in SS if you're under full retirement age and have wage income, but you'll still take a hit. I'm 64, have been retired 3+ years so no wage income, and state and taxes on my SS income will add up to $3,800 for 2017.

Still, that's no reason to keep everything in cash. Unless you've got a very good, COLA-adjusted pension, your savings need to keep pace with inflation. That won't happen with the returns you can get on CDs- the interest will buy less and less as inflation erodes the value of the dollar. I've got about 8 months of expenses in cash and the rest is pretty aggressively invested, mostly in stocks, ETFs and mutual funds.
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Old 12-13-2017, 12:47 PM   #11
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I think Braumeister pretty much covered it.
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Old 12-13-2017, 01:49 PM   #12
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The plot thickens. Thanks Athena for pointing that out. I guess if I'm having such success at investing that I have to worry about increasing my AGI, I should be cheering, no?
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Old 12-13-2017, 02:44 PM   #13
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I guess if I'm having such success at investing that I have to worry about increasing my AGI, I should be cheering, no?
Yeah, it's a good problem to have. I would find keeping my retirement funds in cash-type investments a lot scarier than paying taxes on the realized gains. Remember, too, that at least under current law, long-term gains (sales of assets held over one year) are taxed at only a 15% rate.
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Old 12-13-2017, 03:01 PM   #14
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LTCG goes to 20% at higher income level
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Old 12-13-2017, 03:09 PM   #15
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really MUCH higher income level... I'm guessing much higher than most posters here:

Quote:
The 20% top rate on dividends and long-term gains starts at a higher amount
for 2017: Singles with taxable income above $418,400, household heads over $444,550
and joint filers above $470,700. The 3.8% Medicare surtax boosts the rate to 23.8%.
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Old 12-13-2017, 04:31 PM   #16
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LTCG goes to 20% at higher income level
Actually itís goes to 18.8% first for incomes including LT cap gains above $250K MFJ, and then to 23.8% above $470K. You wonít see a 20% cap gain tax, by the time you are there you are already paying the additional 3.8% NIIT.
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