According to data from the Pew Research Center, over 55 million Americans receive Social Security benefits, with almost every working American contributing to Social Security taxes. This government benefit serves as a crucial source of income for retirees, and for some, it may even be their sole source of income.
Before you start claiming Social Security benefits, understanding some key points is essential to maximize your benefits. Let’s take a closer look at these important considerations.
By creating a “My Social Security” account, you can conveniently handle many important tasks directly on your computer or mobile device.
Some may assume that Social Security benefits are a fixed amount for everyone, but that is not the case. The payment amount for each recipient is calculated based on their highest 35 years of earnings. Through the “My Social Security” account, you can view these earnings records. Therefore, if there are discrepancies, you can address them with the Social Security Administration (SSA).
Retirees can claim Social Security at age 62, but waiting often proves beneficial. If you claim benefits at full retirement age or normal retirement age, your benefit amount increases. For those born between 1943 and 1954, full retirement age is 66; for those born in 1960 or later, full retirement age gradually increases to 67. However, if you start claiming at 62, your benefit may be reduced by as much as 30%.
Moreover, you can actually wait until age 70 to claim benefits, garnering the highest possible amount. While waiting may not be feasible for some individuals, it’s crucial to consider as it can enhance your benefit amount for the rest of your life.
You can use your “My Social Security” account to see how different starting ages would impact your benefit amount.
Even in retirement, you may want to pursue part-time work or a side job to earn extra income and pass the time. However, working while receiving Social Security benefits could affect the amount you receive.
If you claim benefits before reaching full retirement age and your income exceeds a certain threshold, a portion of your monthly benefit may be withheld. Once you reach full retirement age, your benefits will increase to compensate for previously withheld months. After reaching full retirement age, you can work and earn as much income as possible without impacting your benefit amount.
A spouse can receive up to 50% of the higher-earning partner’s benefit amount. However, if benefits are claimed before full retirement age, the lower-earning spouse’s benefit may be reduced.
You may be required to pay federal income tax on up to 85% of your Social Security benefits. Whether taxation applies largely depends on your “combined income,” as defined by the SSA.
Your combined income equals adjusted gross income plus tax-exempt interest plus half of your Social Security benefits.
For single individuals with combined incomes between $25,000 and $34,000, up to 50% of benefits may be taxable; if income exceeds $34,000, up to 80% of benefits may be taxable.
For married couples filing jointly with combined incomes between $32,000 and $44,000, up to 50% of benefits may be taxed; if combined income exceeds $44,000, up to 85% of benefits may be taxable.
Millions rely on Social Security benefits for their livelihood after a lifetime of contributing to the system. However, navigating this system can be extremely complex, and there are key points to keep in mind to make the most of your benefits.
First, create a “My Social Security” account. This will make several processes easier, such as understanding how your benefits could change with different claiming ages. That said, it’s important to know that delaying your claim can lead to higher benefits. You can start claiming at 62, but waiting until 67 or 70 means bigger checks.
You should also understand how spousal benefits work.
Additionally, depending on your income and filing status, you may need to pay taxes on a portion of your benefits. Collaborating with tax and financial advisors to determine the best approach for handling Social Security benefits based on your specific circumstances could be beneficial.
In conclusion, taking the time to educate yourself on the nuances of Social Security benefits can help you make informed decisions to secure your financial future.
The original article “What to Do Before You Claim Social Security” was published on the English Epoch Times website.