Core Issue - Retirees may face unexpected tax bills due to the combination of investment income and Social Security benefits, leading to multiple tax consequences [2][3] Taxation Mechanism - Social Security taxation is based on "combined income," which includes adjusted gross income, nontaxable interest, and half of Social Security benefits, creating a compounding effect that can catch retirees off guard [4][5] Taxable Income Calculation - For single filers, taxation on Social Security benefits begins at a combined income of $25,000, meaning even modest investment income can trigger unexpected tax consequences [5][6] Example Scenario - A retiree with $35,000 in Social Security and $40,000 in dividends and interest has a combined income of $57,500, resulting in approximately $30,000 of taxable income that would have been tax-free with lower portfolio withdrawals [6] Bracket Creep - The 2026 tax brackets create a compounding issue where retirees may start in the 12% bracket, but as taxable Social Security benefits increase total income above $50,800, the next dollars are taxed at 22%, effectively doubling the tax rate on that portion of income [7][8]