Social Security

Social Security ?

Get It Right!

“Only about 4% of retirees make the optimal Social Security claiming decision. This results in a loss of wealth of roughly $2.1 Trillion for current retirees that made a sub-optimal claiming decision.”*

You’ve spent decades contributing to your Social Security benefits. As you approach retirement, you’ll likely face a host of decisions that could significantly impact your financial future. One of the critical decisions you’ll make is when to file for Social Security. This will play an important role in your broader retirement income plan.

For many Americans, Social Security is the “bread-and-butter” of their income during retirement. Your Social Security filing date decision will no doubt impact the amount of essential and discretionary income you’ll have during retirement. And the decision you make is permanent after 12 months.

 Understanding Your Benefits

For many years, 65 was the default age(Full Retirement Age)  for retirement because that’s when full Social Security benefits used to begin.

Today, full Social Security benefits start between age 66 and 67 for most Americans. Plus, you now have the option to get reduced benefits as early as age 62 or delay your benefits up to age 70 to increase your monthly Social Security income.

Filling Options and Other Considerations

All the opportunities Social Security offers to retirees and their families are great. But the many rules concerning when to file make it complicated for individuals to find the right opportunities for them. The filing rules are just one aspect of Social Security that you should understand. There are other topics that can influence your filing decision.

Paying Taxes and Social Security

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Paying Taxes on Money That You’ve Already Paid Taxes On

It’s important to consider how various income sources are taxed as it can affect how much money you’ll actually have for retirement expenses. For many Americans, their social security benefit will be taxed (again). Why?

By the end of 1983, the Social Security Trust Fund was getting low on cash. Measures had to be taken to maintain its solvency and amendments were made.

Long-term changes included increasing the full retirement from age 65 to age 67. Other changes included provisions designed to boost revenue collection, including a gradual increase to the payroll tax of all working Americans.

The Controversy Around Taxing Social Security Benefits 

In 1984 the taxation of Social Security benefits was implemented. For singles (and couples filing jointly) whose modified adjusted gross income combined with one-half of their social security benefits that exceeds $25,000 and $32,000 (respectively) 50% of their Social Security benefits are subject to taxation.

In 1993, second-tier taxation was introduced under the Clinton administration.  Using the same formula as above, single filers and couples filing jointly with more than $34,000 and $44,000 may be taxed up to 85% on their Social Security benefits.

The fact that the income thresholds have never been adjusted for inflation are a big reason why more and more seniors are subjected to this tax. And at some point in the future, some could be forced to pay back some of their benefits to the Social Security Administration!

Other Considerations-Working In Retirement

Many retirees may want to work part-time to reach a desirable income during retirement. If you plan to work while collecting Social Security benefits, some of your benefits may be withheld if you start collecting before full retirement age or in the year you reach full retirement age.

That money can be recouped at full retirement age when you begin receiving these withheld benefits. Once you pass your full retirement age, the Social Security Administration no longer limits the amount of earnings you can receive.

Maximizing Your Social Security Benefits

Remember, Social Security is a choice of a lifetime that can impact the quality of your retirement. You can file for social security benefits as early as age 62 but would that be your best choice? Would you need the income starting at 62, or would you want the maximum amount of Social Security income?

Have you considered the impact on your decision subject to some of life’s issues like death, disability, or divorce? Once the choice is made, you are locked in for life.

One of the Most Important Decisions of A Lifetime

Calling the Social Security Administration is not the answer to getting a comprehensive understanding of all of your Social Security options and benefits. We suggest getting your Social Security options analyzed by one of the largest retirement institutes in America. The service and analysis is free, absolutely no obligation!

Feel Good Knowing That You Made the Right Decision

Find out more here.

 *Additional United Income, Inc. a Capitol One company