How to Maximize Your Social Security Benefits
Retiring is a big step and it takes a lot of hard work to be able to retire completely. Years of your life are spent saving and making sacrifices so that further down the line, as time goes by, you have built up enough financial security. On top of any savings you may have accumulated over your life, luckily, Social Security is there to assist Americans from all walks of life as they get older. There are certain ways to make sure you get the most out of your social security benefits and there are pitfalls you need to be aware of.
Taxes
Minimize your Social Security taxes as much as possible. Some folks aren’t aware you might have to pay taxes on part of your Social Security income in retirement. Working while you are getting benefits may help you with a higher monthly income in the short term but be aware of the tax implications.
The SSA says that if the sum of your adjusted gross income, nontaxable interest, and half of your Social Security benefit is more than $25,000 for individuals and $32,000 for couples, up to half of your benefits could be taxed. If you are a couple and are filing jointly and have a combined gross income of $44,000 and above you will have to pay tax on up to 85 percent of your Social Security benefits. The same goes for an individual whose income sources top $34,000.
Timing
Make sure that you pay into Social Security for at least 35 years. Your Social Security benefits are calculated based on the 35 years in which you earned the most money. If you don't work for the full 35-year period the years you don’t work are factored into the calculation. This drops the amount you get each year. The more years you are not working, the less you will get. Bear in mind you can start collecting Social Security payments as early as age 62, but you will receive smaller monthly payments if you don’t wait until the full retirement age of 67. Payments from SSA increase by about 8 percent for each year that you delay claiming Social Security.
As your retirement age approaches you will need to get more of an understanding of your social security benefits and what you are eligible for and figure out if you owe any taxes. The sooner you get your social security plan in place the better so that you can adjust any other parts of your life that you need to when the time comes.
IMPORTANT DISCLOSURES
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.
Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
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David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC