Every month well over 60 million people receive a payout from the Social Security Administration. For 34% it is their only source of income, and 62% rely it for at least half their monthly income. According to the Center on Budget and Policy Priorities, without it, the poverty rate for retirees would rise from 8.5% to approximately 40%. To say the least, for the majority of retirees, Social Security plays an essential part of their retirement plan. In spite of the critical role Social Security plays for retirees, there’s quite a bit the average American doesn’t understand about it. Several studies have shown that less than 30% of adults have a good knowledge of how Social Security works and would apply to them. This can have serious unexpected financial consequences for them. In 1983 an amendment was passed to federally tax benefits on single taxpayers making more than $25,000 annually. This was raised to $34,000 in 1993. For joint taxpayers benefits were taxed at $32,000 and were raised to $44,000 in 1993. 50% to 85% of Social Security benefits above this point are taxable, and these income thresholds have not been adjusted upwards in 35 years. Somehow most people don’t think their benefits are taxable, and it’s a shock to them when they discover this when they file their taxes. There are also 13 states that tax Social Security benefits to a varying degree. The taxation will likely not be a problem for the 34% for whom Social Security is their only retirement plan. But this is not the case for those who have saved for retirement either privately or in their 401K’s or those with a Pension. The income from these sources are very likely to push them above the income threshold. If they have not planned for this or are unaware of this, it can come as quite a financial shock. This is one of the reasons that proper retirement planning is essential. This is not a do it yourself project. Find a financial advisor that you trust. Meet with him or her on a regular basis. Construct a plan taking into account your anticipated retirement income, but also expected and unexpected retirement expenses. Make sure your money is best positioned to help you achieve your goals, give you flexibility, and that you do include money for fun. Retirement is supposed to be the best time of your life. Make it so!! Suzy Giorgio Sgiorgio19@gmail.com