In this week’s Richmond Refresher, we talked about one of the most misunderstood parts of retirement: how Social Security is taxed — and why it can sometimes feel surprising.

Understanding the formula is helpful. But once you know how it works, the more meaningful question becomes:

How should you think about Social Security within the bigger picture of retirement?

Let’s take that one step further.

Social Security Doesn’t Sit Alone

It’s easy to think about Social Security as its own decision.

When should I claim?
How much will I receive?
Will it be taxed?

But the taxation of Social Security isn’t based on the benefit alone. It’s based on how that benefit interacts with the rest of your income.

Under federal law, the IRS uses what’s commonly called “combined income” (sometimes referred to as provisional income). That includes:

• Your Adjusted Gross Income (AGI)
• Nontaxable interest
• Plus 50% of your Social Security benefits

As that combined number increases, a larger portion of your Social Security benefit may be included as taxable income — up to 50% at one level and up to 85% at a higher level. Importantly, that does not mean 85% is taxed at 85%. It simply means that portion may be counted in taxable income.

The key idea here is interaction.

Social Security isn’t taxed in isolation. It’s taxed in relationship to everything else.

And that relationship can change over time.

Retirement Income Today Is More Flexible — and More Complex

A generation ago, many retirees relied heavily on pensions alongside Social Security. Income was often steady and predictable.

Today, retirement income is typically more flexible.

IRAs and 401(k)s.
Brokerage accounts.
Pensions.
Part-time work.
Required minimum distributions later in retirement.

With that flexibility comes movement. Income may look different from one year to the next.

And when income shifts, the taxation of Social Security can shift with it.

The system itself isn’t unstable — the formula is clearly defined in federal law. What changes is the mix of income around it.

Understanding that can feel empowering.

It reminds us that taxation is part of a broader pattern, not a random surprise.

A Little Historical Perspective Helps

Social Security benefits were not always taxable. Congress introduced taxation of benefits in 1983 and later increased the maximum inclusion to 85% in 1993 (Internal Revenue Code ?86).

One important detail: the income thresholds that determine taxation have never been indexed for inflation.

Over time, as income levels rise generally, more retirees may find that a portion of their benefit is included as taxable income.

That context matters.

It tells us this structure wasn’t accidental. It has been in place for decades. And it operates consistently.

When something feels confusing, often what we really need is perspective.

Thinking in Terms of Coordination

It’s natural to ask, “How do I avoid paying taxes on Social Security?”

A more helpful way to frame the question may be:

“How does Social Security coordinate with the rest of my retirement income?”

Retirement planning is rarely about one single lever. It’s about how income sources work together — across years, sometimes decades.

Over a 20- or 30-year retirement, even modest differences in taxable income can gradually become more meaningful. Not because of dramatic swings, but because small interactions compound over time.

This isn’t about urgency.

It’s about awareness.

And awareness tends to create confidence.

A Steadier Way to Think About It

If this topic has ever felt frustrating, that’s understandable.

The formula isn’t intuitive.
And it isn’t always explained clearly.

But it is structured.
It is consistent.
And it is knowable.

Social Security is one part of a broader income story. When income sources evolve — whether through distributions, required minimum distributions, pensions, or other life changes — it can be helpful to simply step back and view the whole picture again.

Not reactively.
Not anxiously.
Just thoughtfully.

Clarity has a calming effect.

And in retirement, calm is a gift.

This content is for educational purposes only and is not intended as individualized financial advice.

Sources:

IRS Publication 915: Social Security and Equivalent Railroad Retirement Benefits
https://www.irs.gov/publications/p915

  Social Security Administration: Taxes and Your Benefits
https://www.ssa.gov/benefits/retirement/planner/taxes.html

  Internal Revenue Code ?86 (Taxation of Social Security Benefits)

  Congressional Research Service Report RL32552: Social Security: Taxation of Benefits