If you’re looking for the best social security advice article—one that ensures you’ll go into retirement getting your maximum benefits—you’ve found it.
For most of your life, you’ve been contributing to Social Security, building your earnings record. But as retirement approaches, it becomes imperative that you establish a monthly benefit strategy. That strategy should result in collecting Social Security payments that are not only as high as possible, but that aren’t taxed.
Not only does The Senior Life have an abundance of Social Security guidance for you, we’re also pointing you toward other resources in this, the best Social Security advice article available today.
The Senior Life’s Best Social Security Advice
Before we send you to other online resources, let’s go over the basics of how to claim Social Security benefits that are to your greatest advantage.
Know your retirement age strategy
For many years, claiming benefits from Social Security started at age 65 for all Americans. But then, in 1983, a law was passed that gradually raised the retirement age based on birth year. This was done because life expectancies are increasing…which could ultimately break Social Security.
Now, if you were born between 1943 and 1954, your full-benefit retirement age is 66. Born between 1955 and 1960? Then you can retire and get full benefits at age 67.
In order to receive the maximum benefit, you need to reach your full retirement age before retiring. You can claim Social Security early, as young as age 62, but you will only be eligible to receive a benefit that’s reduced by as much as 30%. To be more specific, your benefit will be reduced by 5/9 of one percent for every month before full retirement age…for up to 36 months in advance. If you retire more than 36 months before full retirement age, then the benefit is reduced by 5/12 of one percent for every month.
Or, if you enjoy your job and you’d like to sweeten the pot even further, you can add delayed retirement credits to your payments. That means working past your full retirement age, up to 69 years old. You can keep working after that, of course, but no further delayed retirement benefits will be given.
This poses a math problem for many retirees: Should I retire early, and collect a reduced benefit for a longer period of time, or work for a few more years and get larger payments?
This is where professional, NSSA-certified financial planning becomes valuable. A financial advisor can create a list of pros and cons and give you the truth in real numbers. In the meantime, you can see what the Social Security office’s retirement calculator has to say.
Avoid Social Security taxes
Whether or not you’ll owe taxes on your Social Security payments will depend upon something called Provisional Income.
That’s your adjusted annual gross income, which is calculated by adding together your retirement plan disbursements, earned nontaxable interest, 50% of your Social Security benefits and employment income.
This is why you may see retirees watching how much they earn at their part-time jobs. Because if single people exceed $25K per year ($32K for married couples filing jointly), they will pay taxes on their Social Security benefits.
More specifically, if a single filer’s provisional income is between $25K and $34K ($32K and $44K for joint filers), benefits could be taxed at a rate as high as 50%. Furthermore, if provisional annual income exceeds $34K for a single person (or $44K for a married couple), then as much as 85% of the benefits can be taxed.
That sounds pretty limiting doesn’t it? Like you’ll have too many financial limitations during retirement? Well, there are things you can do to supplement your retirement income without adding to your provisional income.
If you’re concerned about paying taxes on your Social Security benefits (which you should be), make sure retirement planning includes:
- Save cash for retirement. When you have cash in the bank, you can withdraw it as needed, and that’s not added to your provisional income.
- Open a Roth IRA. Contributions to a Roth IRA are post-tax, and if you roll funds from another type of retirement savings account into a Roth IRA, you will pay tax. However, withdrawals from that Roth IRA during retirement do not count toward provisional income, meaning they won’t cause your Social Security benefits to be taxed.
- Buy a cash-value life insurance policy. This is a permanent type of life insurance policy that has an investment feature. The cash value portion can be borrowed against or withdrawn, and will not count as part of your provisional income.
- Monitor earnings on investments. Remember that investment gains are considered provisional income, so work with a money manager to make sure that your investments during retirement are steady-growth oriented (i.e. predictable) so that massive gains don’t put you over the threshold and result in Social Security taxation.
- Make withdrawals before Social Security benefits start. This would be something to work on with an expert financial advisor. There will likely be penalties for early withdrawal from most plans; however, acquiring some of those funds before retirement might serve as a provisional income control.
These are some basic best practices that will help you control Social Security taxation. For more detailed retirement tax strategies, be sure to contact The Senior Life so we can steer you in the direction of a retirement tax professional.
Some retirees, thanks to careful retirement planning, will have significant incomes during retirement. In cases like these, it makes no sense to try to reduce the income to below Social Security taxation levels. Instead, taxes should be managed, rather than eliminated.
Understand spousal benefits
Many retirees aren’t aware that their spouse is eligible for Social Security benefits based on the worker’s earnings record and the spouse’s age. The spouse must be at least 62, or must be caring for a qualified child (a child who’s under the age of 16 or who is currently receiving Social Security benefits).
There are a number of factors that will affect the amount of the spousal benefit, but the spouse’s benefit can easily be computed using the Social Security Benefits for Spouses calculator.
Understand survivor benefits
Social Security does provide a death benefit to surviving family members of a worker who’s been earning a wage for at least ten years. However, since we’re most concerned about Social Security during retirement, let’s focus on what happens if someone who’s collecting Social Security retirement benefits dies.
The entire Social Security survivor benefit plan can be found online, but here are some of the highlights:
- The spouse (or divorcee in some situations) can receive survivor benefits if they’re over the age of 60 (or over 50 and disabled).
- If the deceased’s dependent is under 16 or disabled, the surviving spouse can collect benefits.
- An unmarried child (under age 18), a child who is a full-time student (under age 19) or a disabled child (if diagnosed before 22) is eligible for survivor benefits.
- Even a dependent parent can be eligible for survivor benefits, under some circumstances.
Again, this can be a complicated subject, and may require professional guidance to fully understand all the benefits available to you and your family and dependents.
Read on to learn all about where you can go to get more information about Social Security retirement benefits.
More Resources for the Best Social Security Advice
The best place to get accurate, up-to-date Social Security information would be straight from the horse’s mouth at ssa.gov. There, you will find the internet’s most comprehensive guide to Social Security, including retirement estimators, benefits calculators, disability services, Medicare guidance and enrollment, frequently asked questions (and answers), news, statements and so much more.
So take some time to visit ssa.gov to familiarize yourself with the Social Security system.
If you would like more hands-on guidance, to ensure that you’re taking full advantage of all Social Security has to offer, then consider hiring a National Social Security Advisor as your financial planner.
When you hire a financial advisor with an NSSA certification, you can be sure he or she is qualified to advise you on Social Security matters.
You may find your local Social Security office to be helpful as well. You can simply Google “Social Security office near me” or visit the Social Security Administration’s locator.
And as always, The Senior Life is here to help. We hope you’ve found this to be the best Social Security advice article on the internet, and we want to continue to help you manage your money and to live the retirement of your dreams! Let’s do this!