Spring Forward with These 8 Social Security Facts
Social Security is a valuable program that ensures retirees have a bit of guaranteed income to rely on in their golden years. However, many Americans don’t understand how it works. Thoroughly understanding the ins and outs of Social Security will ensure you’re able to take full advantage of your benefits and avoid leaving any money on the table. Here are 8 facts that you may not be aware of:
1) Social security benefits will not disappear. Many worry that there’ll be no Social Security benefits available by the time they retire. While there’s some conflicting information out there as to when fund reserves will be depleted, Social Security is largely made up of payroll taxes, which will continue to be collected for the foreseeable future. And, if the fund does end up depreciated, recipients will still receive a portion of their benefits.
2) Social Security isn’t enough to live on during retirement. Data shows Social Security benefits will only replace about 40% of pre-retirement earnings. However, they are valuable and you’ll want to do whatever you can to maximize them. The more you invest in a retirement plan, such as a 401(k) or IRA, the more flexibility you’ll have in managing your retirement costs, because you’ll have more sources of income.
3) Benefits are based on your highest 35 years of earnings. Are you worried that several years on a lower salary will negatively impact how much you receive in Social Security benefits? The good news is that the formula for calculating your benefit is based on your 35 highest-earning years, as well as the age you begin taking Social Security.
4) You will receive greater Social Security benefits if you wait. The longer you wait to take Social Security, the more money you’ll receive. You can claim these benefits as early as age 62, for a reduced benefit. Waiting until your full retirement age means you’re entitled to 108% of the monthly benefit. If you choose to delay your retirement until age 70, you’ll get 132% of the monthly benefit.
5) Your ex-spouse may also receive benefits. According to the SSA, your ex-spouse may receive benefits if the marriage lasted for 10 years or longer, your ex-spouse is unmarried, your ex-spouse is age 62 or older and you are entitled to Social Security retirement or disability benefits.
6) Some of your benefits may be withheld. If you claim your benefits before reaching full retirement age, are still working, and make more than the yearly earnings limit, some of your Social Security benefits may be withheld. The cap is $22,320 for 2024, and you would lose $1 in benefits for every $2 in earnings above the max if you are under full retirement age. You don’t really lose the benefit, though. You just won’t receive it while you are below full retirement age. But, as soon as you hit that age, Social Security will recalculate and give you credit for those dollars.
7) You can undo a Social Security benefits claim decision. You can undo a Social Security benefits claim decision within 12 months of initially claiming benefits. If you decided to claim your benefits and then realized you should have waited, the Social Security Administration allows you to withdraw your application for a one-time do-over. For example, you may regret the timing of when you decided to take Social Security benefits. Or, you could decide to take on a part-time job and no longer need the extra income..
8) You may have to pay taxes on Social Security benefits. Taxes may apply to Social Security benefits based on total income. For single filers earning between $25,000 and $34,000, up to 50% may be taxable; over $34,000, up to 85% may be taxable. Joint filers with a combined income of $32,000 to $44,000 may have up to 50% taxable, while over $44,000, up to 85% may be taxable.
There are many strategies to maximize your social security benefits. Talk to someone on the NIHFCU Wealth Advisors team — they’re dedicated to making a financial planning and investing experience both rewarding and satisfying.
Resource: Newsbreak.com
