The short version: Social Security benefits are tax-free until your other income crosses a line, then up to 85% of them become taxable. Because the lines were set in 1983 and 1993 and never adjusted for inflation, an ordinary Michigan retiree with a pension and a modest IRA withdrawal now crosses them. In the crossing zone, each extra dollar you pull from an IRA is taxed itself and also drags 50 to 85 cents of Social Security into taxable income with it. Retirement planners call that the tax torpedo. Panic Proof Retirement in Bloomfield Hills plans around it for clients every day, and this article shows you the mechanics so you can see it in your own numbers.
How the tax on Social Security works
The IRS starts with a figure called provisional income (also called combined income): your adjusted gross income, plus tax-exempt interest, plus half of your Social Security benefits. Then it applies two thresholds:
- Married filing jointly: below $32,000, none of the benefit is taxable. Between $32,000 and $44,000, up to 50% is. Above $44,000, up to 85% is.
- Single: the same tiers at $25,000 and $34,000.
Those dollar figures have not changed since 1993. Everything else in the tax code, brackets, the standard deduction, IRMAA lines, moves with inflation each year. These do not. In 1993 a couple with $44,000 of provisional income was comfortable. Today that is a pension and a few IRA withdrawals.
Where the $1.85 comes from
Inside the phase-in range, every additional dollar of other income makes 50 cents, then 85 cents, of Social Security newly taxable. So one extra IRA dollar adds $1.85 to taxable income. In the 22% bracket that dollar is effectively taxed at 22% × 1.85, or about 40.7%. In the 12% bracket it is about 22.2%. A retiree who thinks they are in the 12% bracket is actually paying a marginal rate closer to what a working professional pays.
A hypothetical. A Troy couple has $36,000 of combined Social Security and a $30,000 pension. They withdraw $20,000 from an IRA for a new roof. That withdrawal is not taxed at 12%. Because it pushes them through the 85% zone, roughly $17,000 of Social Security that was untaxed becomes taxable, and the real federal cost of the $20,000 withdrawal is closer to $4,400 than the $2,400 they expected. Hypothetical example for illustration only. Actual results vary.
Who gets hit hardest
The torpedo is not a problem for the very wealthy; their benefits are 85% taxable no matter what, so nothing more can be dragged in. And it is not a problem for retirees living on Social Security alone. It lands on the middle: households with roughly $40,000 to $110,000 of total retirement income, made up of Social Security plus a pension, IRA withdrawals, or both. That describes a large share of Metro Detroit's auto, teaching, and public-sector retirees.
The 2025 federal tax law added a temporary extra deduction for taxpayers 65 and older for tax years 2025 through 2028. It lowers the tax bill for many retirees, but it does not change the provisional income formula, so the torpedo's marginal effect is still there for the households it applies to. Plan as if it is.
Four ways to plan around it
- Convert to Roth before Social Security starts. The years between your last paycheck and your first benefit check are the only time IRA money can be moved without a Social Security dollar riding along. Roth withdrawals later do not count toward provisional income at all. This is the single most effective move and it has an expiration date: the day you claim.
- Delay Social Security and spend the IRA first. Drawing IRA money from 62 to 70 while the benefit grows about 8% a year does two things: the IRA is smaller when required distributions begin, and the larger benefit at 70 replaces taxable IRA income with income that is at most 85% taxable.
- Build tax-free income sources. Roth accounts, the return of principal from non-qualified annuities, and properly structured cash value life insurance produce spendable dollars that do not appear in provisional income. Municipal bond interest, by contrast, does count. Many retirees are surprised by that.
- Give from the IRA after 70½. A qualified charitable distribution sends money from your IRA directly to a charity. It satisfies your required distribution and never touches your adjusted gross income, so it never triggers the torpedo. If you give to your church or a charity anyway, this is the account to give from.
What this looks like in a written plan
When we build a Retirement Check-Up for a couple, the tax torpedo is one of the first things we look for, because it changes the answer to almost every other question: which account to draw from first, when each spouse claims, how much to convert each year, and how much of the nest egg should sit in guaranteed income that is not subject to market losses. The plan shows the provisional income line year by year, so you can see exactly which withdrawals cross it and which do not.
Frequently asked questions
What is the Social Security tax torpedo?
It is the spike in your marginal tax rate that happens when extra income makes more of your Social Security benefit taxable. In the phase-in range, each added dollar of other income makes up to 85 cents of benefits newly taxable, so one dollar can add $1.85 of taxable income and be taxed at an effective rate of about 22% in the 12% bracket or about 41% in the 22% bracket.
At what income is Social Security taxed?
For a married couple filing jointly, benefits start becoming taxable when provisional income exceeds $32,000, and up to 85% is taxable above $44,000. For singles the thresholds are $25,000 and $34,000. Provisional income is adjusted gross income plus tax-exempt interest plus half of Social Security benefits. These thresholds are not adjusted for inflation.
Do Roth IRA withdrawals count toward the Social Security tax?
No. Qualified Roth IRA withdrawals are not included in adjusted gross income, so they do not raise provisional income and do not make more of your Social Security benefit taxable. That is the main reason Roth conversions before claiming Social Security are effective against the tax torpedo.
Does Michigan tax Social Security benefits?
No. Michigan does not tax Social Security benefits at the state level. The tax torpedo is a federal issue, though Michigan's treatment of pension and 401(k) income still matters for the overall plan.
Can I avoid the tax torpedo completely?
Sometimes. Households that convert enough to Roth during the bridge years, or that have most retirement income in Roth or other non-countable sources, can keep provisional income under the thresholds for life. For most retirees the realistic goal is to manage it: keep withdrawals out of the 85% zone in most years and bunch unavoidable income into as few years as possible.
A straightforward next step
The free Retirement Check-Up is a 30 to 60 minute conversation in our Bloomfield Hills office, on Zoom, or by phone. You leave with a written picture of where you stand: income, taxes, Social Security timing, and what to do first. Zero cost, zero obligation. or call (844) 447-2642. Our phone is answered around the clock.
Panic Proof Retirement™ is a licensed insurance agency. Investment advisory services are offered through Bridgeriver Advisors LLC, a registered investment adviser; client investment accounts are held in custody at Charles Schwab. Fixed index annuities are insurance products, not securities, and guarantees depend on the claims-paying ability of the issuing insurance company. This article is educational and is not individualized tax, legal, investment, or insurance advice. Tax thresholds and rules change; confirm current figures with your tax professional before acting.