The rules differ depending on your state, but the federal government begins taxing Social Security benefits once provisional income hits $25,000 for single filers or $32,000 for married joint filers. Provisional income is half your Social Security checks plus all taxable and some non-taxable income.
Make sure you check your state’s tax rules as well as the IRS requirements so you’re prepared for what your pre-tax income will look like as a retiree.
4. Check your insurance coverage
Finally, you’ll need to make a plan for getting comprehensive insurance coverage, especially as healthcare is one of the largest expenses retirees face.
This is especially important if you’ll be retiring before Medicare kicks in at 65, as you may need to stay on an employer’s plan through COBRA or shop for independent insurance. But even if you’re already Medicare eligible, you may want a Medigap or Medicare Advantage plan to provide broader coverage. You’ll want to know how much this is likely to cost and what your out-of-pocket care expenses could be.
By setting a budget, assessing your income sources, and determining the effect of taxes and healthcare on your retirement income, you can make a fully informed decision as to whether or not you’re really in a financial position to support yourself without a job for the rest of your life.
