Provisional Income and Retirement Planning

For more than two decades, Certified Financial Planner Robert M. Ryerson has worked with a team of tax, mortgage, and insurance professionals for the financial services firm New Century Planning. Robert M. Ryerson is a noted financial planning expert and has written articles for leading publications such as Forbes covering a number of important retirement topics, including required minimum distributions and  provisional income.

Provisional income is a figure calculated by the IRS to determine if a Social Security recipient’s benefits should be taxed. Provisional income is derived by combining pension payments, IRA and 401(k) distributions, capital gains, and tax-free investments with 50 percent of the anticipated annual Social Security benefits. If this number exceeds $44,000 for a couple or $34,000 for an individual, only 15 percent of Social Security benefits can be collected tax-free.

If not planned for thoughtfully, provisional income can cause retirees to face unexpected penalties and taxes, which can reduce their living standards. With the assistance of a qualified financial planner, high-earning families and individuals can arrange their post-retirement income in order to minimize the tax liabilities.