Things You Should Know About Social Security and Your Retirement
With more than 95% of American workers currently covered by Social Security, there are some things about this massive retirement program that you should probably know. If you’re still in your forties or fifties, you can probably wait a few years to learn the intricacies of Social Security, but if you’ve recently entered your 6th decade on this planet, here are a few things you should be aware of:
- Your social security retirement age can vary, depending on the year you were born. For instance, those born in 1954 or earlier currently have a retirement age of 66 years, according to the Social Security Administration. But if you were born in 1957, your retirement age is 66 years and 6 months. And for those born in 1960 or later, the retirement age jumps to 67 years.
- While the opportunity to take early retirement benefits beginning at age 62 is available, your benefit payment will be permanently reduced – by up to 30%, depending on when you begin to collect benefits.
- On the other hand, you're taking a bet against Social Security by deferring. What if you only live until 80 and you waited until 70 to collect? You missed out on 5-7 years of benefits. Know your "breakeven."
- If you wait beyond your specified retirement age to collect benefits, you can substantially increase the amount of benefits received monthly, with up to 24% increase if you wait until the age of 70 to start collecting benefits.
- All Social Security beneficiaries will see a 2.8 Cost of Living Adjustment (COLA) in 2019. However, the Social Security Administration has also indicated that they plan to raise Medicare premiums in 2019 as well, so how much of an actual benefit you’ll see in your monthly check, beginning December 31st of this year, remains to be seen.
- Increases will also go into effect for annual earnings, so beginning in 2019, you’ll be able to earn more money from employment while also collecting Social Security. This applies only to those collecting Social Security early or those that will reach their full retirement age in 2019. Once you reach your full retirement age, the earnings test is no longer relevant.
- Those that collect Social Security benefits for other reasons such as survivor benefits or Social Security Disability will also see an increase in benefits.
- If you will be collecting benefits for the first time in 2019, be aware that there can be major tax implications, depending on the amount of income earned that year. In some situations, up to 85% of Social Security benefits received may be considered taxable income.
Even if you haven’t reached retirement age, it’s never too early to take charge of your Social Security benefits. Visit the Social Security Administration to learn more about Social Security. When there, be sure to sign up for My Social Security, where you can download a copy of your current Social Security Statement, and calculate your retirement benefits using the Retirement Estimator. You can also visit the Benefits Planner feature, which guides you through the entire benefit application process, including applying for disability.
*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2023 Advisor Websites & Focus Asset Management