Social Security is such a key part of retirement planning, but people have a lot of questions that they never ask about. If you’re relying on Social Security to secure your retirement, you must know the answers to some key questions.
Don’t know what questions to ask?
We have you covered. We’ll be discussing the most important questions you should be asking about Social Security.
Top Social Security Questions and Answers
How Do I Find Out How Much My Social Security Benefits Will Be?
Determining your Social Security benefits was, at one time, much easier. Many people probably remember the time when paper statements were sent to you in the mail explaining just how much your benefits would be if you retired now or in the future.
However, the Social Security Administration wants to save money and encourage people to use its website. As a result, you won’t receive these paper statements in the mail anymore.
Instead, you’ll want to go to:
- Sign up for “my Social Security”
- View your benefit estimates inside
We can run estimates to determine your benefits, but the only 100% accurate solution to find out about your Social Security benefits is to go straight to the Social Security Administration.
You can view how much you’ll have in benefits if you retire now or in the future. Additionally, you can apply for benefits right on the platform if you like. You should sign up about three months before you plan to take your benefits just to be on the safe side.
Bonus Question: What about spousal benefits and Social Security?
Individuals have two options for Social Security:
- Their own benefit
- Their spouse’s benefit
Why would you want to take your spousal benefits? Typically, one spouse works more than the other spouse or earns more than their spouse and can take higher benefits. Ultimately, most people want to maximize their benefits, so they’ll only take their benefit if it’s the higher of the two amounts.
Let’s see a few examples of this:
- One spouse goes to work, and the other raises the kids. If you’re married for 10 or more years, your spouse can take your spousal benefits.
- Both spouses are the same age (just to make this easy), and they’re 67 years old.
- The working spouse has $3,000 a month in Social Security benefits.
- The non-working spouse, who didn’t get to work and earn credits, may have a $1,000 benefit.
- You can take your $1,000 benefits, or you can take half of your spouse’s benefit.
- So, based on this, the non-working spouse will want to take spousal benefits because they’re $1,500 a month versus their own $1,000 a month.
- In total, the couple would have $4,500 a month in Social Security benefits.
However, if the working spouse is 67 and the non-working spouse is 65, the math is a little different. If the spouse who didn’t go to work applies at 65, they’re applying early and will have the benefit cut down to $1,350 or a figure around this amount.
What is the Youngest That You Can Take Social Security?
Barring any disability or any other issues, you can retire at 62. However, the earlier that you take your benefit, the lower your benefits will be. Benefit increases will end at 70, so there’s no reason to wait longer to take your benefits.
If you take in around $20,000 or more a year, you are penalized for taking your benefits before full retirement.
If you don’t understand your benefits or want advice on the best way to maximize your benefits, schedule a call with us today.
How is Social Security Taxed?
Many people get upset that they have to pay taxes on their Social Security. For many of our clients, it’s a sore spot and a major topic of discussion. However, under current law, you may have to pay taxes on your benefits.
Married and Filing Jointly
Unless you have less than $32,000 in income, you’ll have to pay taxes on your benefits.
$32,000 and $44,000 in Income
If your adjusted gross income falls into this range, you’ll pay taxes on up to 50% of your Social Security. For example, if your benefits are $3,000 a month, you’ll pay taxes on $1,500.
$44,001 and Higher
If you earn over $44,000 in adjusted gross income, you’ll pay taxes on 85% of your benefits.
If you’re single, you’ll pay taxes on 50% of your benefits if you earn $25,000 or more. And if you earn over $34,000, 85% of your benefits are taxable.
Unfortunately, you’ll be taxed on Social Security in most cases. We recommend working with a financial planner to help you determine when to take your benefits and how to minimize your tax burden through strategic tax planning.
When Should I Take Social Security?
If you go to Google, you’ll find most people saying to take Social Security at 70. You’ll maximize your benefits by waiting, yet every family and situation is different. When we work through a person’s retirement plan, we evaluate:
- Expected lifespan
When income is not coming from Social Security, it often comes from assets or retirement accounts. The impact on your retirement may not be much, but if you want to leave as many assets as possible to the next generation, your choice may be different than someone who doesn’t mind leaving a little less to your estate.
There are so many factors to consider aside from maximizing your Social Security by waiting until 70 to start taking it.
For example, if you have more than enough assets or you may only live to 75, taking Social Security earlier may be in your best interest. You need to consider your choice carefully to make the right financial decision for you and your family.
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