3 Social Security Secrets You Must Know Before Retiring
3 Social Security Secrets You Must Know Before Retiring

3 Social Security Secrets You Must Know Before Retiring

Social benefits can have a significant impact on your pension. In fact, about 37% of men and 42% of women rely on their monthly checks for at least half of their retirement income, according to the Social Security Administration.

Before you retire, it is wise to make sure you understand as much as possible about how the program works to maximize your benefit amount. And there are three social security secrets that can help you get the most out of your payments.

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1. The age you claim will permanently affect your benefit amount

The only way to earn the full amount you are entitled to, based on your work record, is to wait for your full retirement age (OFF) to apply for benefits. If you make a claim before that (as early as age 62), your benefits will be reduced by up to 30%.

A common misconception, however, is that if you apply early, your benefit amount will increase when you reach your FRA. In fact, your benefit amount is generally locked in the life after your file. So if you make claims early, expect to receive smaller checks for the rest of your life.

On the other hand, if you delay benefits past your FRA, you will receive your full benefit amount plus a bonus every month. And because your benefit amount is permanent, you charge these larger payments each month for the rest of your pension.

2. It’s smart to have a strategy with your spouse

If you and your spouse are both eligible for Social Security, it is wise to have a strategy for when each of you will start making claims. There is not necessarily a right or wrong answer here as it will depend on your unique situation and personal preferences.

For example, you can choose for one person to apply early while the other delays the benefits. Then you can have a little extra income early in retirement while still receiving larger checks along the way. Or if you know there is a shortage of money in retirement, you can both choose to defer benefits to earn as much as possible each month.

Likewise, if one spouse dies, the other is sometimes entitled to the full amount of the deceased’s survivors’ benefits. If you have reason to believe that one of you will survive the other, it may be worthwhile for that person to consider postponing social security so that the survivor can receive a higher benefit.

3. You can owe tax on your services

Social benefits are subject to both state and federal income taxes. Fortunately, most states do not tax social security, but there are 12 who still do.

Federal taxes will depend on a number called your “total income.” This number is your adjusted gross income (such as 401 (k) payments), plus half of your annual Social Security benefit. If your total income is higher than $ 25,000 a year (or $ 32,000 a year for married couples), you owe federal taxes on a portion of your benefits.

While you may not be able to avoid taxes on your services when you are aware of them, it is easier to incorporate them into your budget and prepare yourself.

Social security can be confusing, but it pays to understand as much as possible about how it works. With these three factors in mind, it will be easier to get the most out of your benefits and enjoy a more comfortable retirement.


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