Suze Orman once shared the best way to avoid the Social Security ‘tax torpedo.’ How you can dodge it and retire richer

Core Insights - The article discusses the impact of income tax on Social Security benefits and highlights the advantages of using Roth accounts to mitigate tax liabilities in retirement [1][4][6]. Taxation on Social Security Benefits - Approximately 40% of Social Security beneficiaries are subject to taxes on their benefits, with tax rates potentially increasing based on provisional income calculations [3]. - For single filers with combined income exceeding $34,000 or married couples filing jointly above $44,000, up to 85% of Social Security benefits can be taxed [4]. - Even individuals with incomes between $25,000 and $34,000 or couples between $32,000 and $44,000 may face taxation on 50% of their benefits [4]. Roth Accounts and Retirement Planning - Roth accounts are emphasized as a protective measure against the tax torpedo, which can adversely affect retirement income [6][9]. - Qualified withdrawals from Roth IRAs are tax-free and do not contribute to the income calculation that determines Social Security tax brackets [7]. - The maximum contribution limit for both traditional and Roth IRAs is set at $7,000 for 2025, increasing to $8,000 for individuals over 50 [9]. Investment Strategies for Retirement - Diversifying retirement portfolios with assets like gold IRAs can provide a hedge against market volatility and inflation, although they may still incur income tax upon withdrawal [10]. - Real estate investments are recommended as a means to diversify portfolios and reduce reliance on Social Security, despite the challenges associated with property ownership [13][14]. - New investment platforms, such as First National Realty Partners and Arrived, allow investors to access commercial real estate and vacation properties with lower capital requirements [15][18][17]. Continuous Investment and Savings - The article suggests that individuals can continue investing even during retirement, utilizing tools like Acorns to automate investments from everyday purchases [20][21]. - Low-risk investments are also encouraged to build wealth without exposure to market fluctuations [22].