Impending Social Security Cuts Threaten Retirees in Select States

Retirees in certain states may face lower Social Security payouts in 2024 due to state taxes on benefits. Ten states, including Colorado, Connecticut, and Vermont, tax a portion of Social Security benefits. Each state sets its own rules regarding who gets taxed and how much. Additionally, federal tax rules apply to Social Security benefits regardless of state taxes. The IRS uses "combined income" to determine federal tax owed, which includes adjusted gross income, half of the annual Social Security benefit, and nontaxable interest. Having a Roth IRA can help lower federal tax bills by providing tax-free withdrawals in retirement.