Annuities Change Social Security Tax Planning | Building Legacies that last.

As we guide clients through retirement income planning at Elitex Financial Solutions, one key trend stands out: with only 14% of private sector workers in the US still having a pension, more retirees are turning to annuities for reliable lifetime income. This choice brings important implications for Social Security tax planning. Unlike wages and self-employment income—both subject to the federal earnings test before full retirement age—income from annuities, pensions, interest, and dividends is not counted for benefit withholding. For example, a $30K annual annuity can help avoid any reduction in Social Security benefits, while earning the same amount in wages could reduce those benefits by about $2,800. Yet, it’s essential to remember that the taxable portion of each annuity payment is included in your combined income, which can affect how much of your Social Security benefit is taxable. When working with clients, we pay close attention to annual annuity income, its taxable share, other income sources, and total annual benefits. The account type and timing of withdrawals can shape your tax picture for years—details that matter in crafting a strategy to help protect and preserve your wealth.