The incredibly frustrating reason you could be missing out on part of your Social Security check

If you pay enough Social Security taxes during your career, you’ll be entitled to a monthly benefit once you retire. But there are a number of reasons why this benefit may be less than you might expect.

If you don’t work for 35 years, you may be stuck with a less generous benefit because Social Security counts your highest-paying 35 years of earnings. And if you file for Social Security before you reach full retirement age, your monthly benefits will be reduced.

Image source: Getty Images.

But there’s a less obvious reason why you might lose some of your Social Security income. And a frustrating one at that.

When taxes get in the way

You might assume that your Social Security benefits are yours to keep free and tax-free. But this is not automatically the case.

Depending on your total income picture, you may be subject to taxes on a large portion of your monthly Social Security checks. To see if this is the case, you’ll need to calculate your provisional or combined income, which is basically your non-Social Security income plus half of your annual benefit.

This is where things get worse. The thresholds for combined income are almost ridiculously low based on today’s cost of living.

For singles, a combined income between $25,000 and $34,000 means you may have to pay taxes on up to 50 percent of your Social Security benefits. Once your combined income exceeds $34,000, you risk being taxed on 85% of your Social Security benefits.

To be clear, this does not mean you will lose 50% or 85% of your benefit checks to the IRS. Rather, that percent of your benefits may be subject to taxes. So if your monthly benefit is $2,000, between $1,000 and $1,700 of that may be taxable. And from there, you will lose some of the amount that applies to you.

For married couples, the combined income thresholds are not much higher. If your combined income is between $32,000 and $44,000, you could have taxes on up to 50 percent of your monthly Social Security checks. Beyond $44,000, up to 85% of your benefits may be taxable.

The reason these thresholds are so low is that they were set decades ago and have not been updated to account for inflation. And that’s surprising, given that Social Security benefits are eligible for an annual cost-of-living adjustment that’s based on inflation. But even so, those thresholds remain, meaning that if you have a decent amount of retirement income, you generally may not keep all of your Social Security.

How to Avoid Paying Social Security Taxes

If the idea of ​​having to pay Social Security taxes aggravates you, you’re in good company. But luckily there it is something you can do about it — save for retirement in a Roth account.

The nice thing about Roth retirement plan withdrawals is that they are not considered taxable income and also do not count toward your combined income. So let’s say you’re single and collecting $48,000 a year from Social Security, or $2,000 a month, which is a notch above the average monthly benefit of today’s retired worker.

Half of your annual Social Security benefit is $24,000, which puts you just below the $25,000 combined income threshold where taxes could start to apply. But if your only other source of retirement income is the $30,000 a year you take out of your Roth IRA, you’re in the clear about paying taxes on your Social Security checks.

If you earn too much money to directly fund a Roth IRA, you can contribute to a traditional IRA and later convert it to a Roth. And Roth 401(k)s are not subject to income limits. So if you have access to an employer plan that offers this savings option, you may want to use it for the sake of protecting your future Social Security benefits.