Millions of older Americans rely on Social Security to pay the bills in retirement. In fact, 21% of married seniors and 44% of unmarried seniors depend on those benefits for 90% or more of their income.
If you expect Social Security to constitute a major retirement income source for you, then it's important that you understand just how much money those benefits will give you. While you can estimate your monthly benefits by consulting your most recent earnings statement (which the Social Security Administration will mail to you if you're 60 or older; otherwise, you can access it online), keep in mind that the amount you're slated to collect may not be yours to keep in full. That's because Social Security income is taxable in retirement for some seniors.
Here's how to know what to expect for your benefits.
Will you pay taxes on your Social Security income?
Whether your Social Security benefits will be taxed will depend on your total income and where you live during your golden years. First, let's talk federal taxes. If your benefits are pretty much your only source of retirement income, then they likely won't be taxed. But if you have other income sources, such as an IRA, 401(k), pension, or earnings from a business or part-time job, then there's a good chance you'll be liable for federal taxes on your benefits.
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