Are you one of the 140 million Americans who do not know 2 crucial facts about social security? | Smart Change: Personal Finance
Are you one of the 140 million Americans who do not know 2 crucial facts about social security?  |  Smart Change: Personal Finance

Are you one of the 140 million Americans who do not know 2 crucial facts about social security? | Smart Change: Personal Finance

(Christy Bieber)

Most seniors receive income from two primary sources: social security and retirement savings. As a result, to assess how much money your investment should produce, you should have an accurate idea of ​​how much social security benefits provide.

Unfortunately one recently Nationwide survey revealed that the majority of workers do not know two crucial facts needed to estimate the funding coming from social security. And this can be a big problem as it will be impossible to set retirement goals without this knowledge.

Here are the two important facts that the majority of Americans are unclear about.

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1. How much income Social Security is expected to produce

According to Nationwide data, about 54% of all adults have no idea how much income Social Security expected to produce in proportion to what they earned on the job.

Since there are about 258.3 million adults in the United States this means that close to 140 million people may lack the most basic knowledge about their retirement benefits.

The sad reality is that many people are not aware of what income level Social Security will provide end disappointed. This is because these benefits are only meant to replace about 40% of what you earned before you left the workforce. They are supposed to work together with savings and pension benefits, even though pensions are no longer common among employees in the private sector.

If you are among the millions in the dark on this key issue, you risk not setting realistic savings targets. It is crucial to understand that social security is intended to replace about half of the total income you need in your later years – at most.

It is up to you to build a nest egg that will give you the rest of the money required to avoid a major drop in quality of life. This means that you need to make sure that you have invested enough to replace at least another 40% of your early retirement earnings, and ideally even a little more than that.

2. If or when benefits are taxable

Americans are also confused about what their tax liabilities will be at retirement. It is estimated that 55% of adults either believe that social security is not taxable, or can not answer whether it is or not, according to the nationwide survey. That’s just over 142 million people.

Unfortunately, if you expect to retain all of your benefits and the IRS and your state government take a share of them, you could face a major shortfall. And because of the way the rules are set up at the federal level, an increasing number of seniors will face this very problem.

See, benefits become partially taxable once provisional income exceeds $ 25,000 for single files or $ 32,000 for married files. Provisional income is half of social benefits, part non-taxable income and all taxable income.

And these thresholds are not indexed to inflation, which means they are not adjusted every year, and more seniors exceed them because wage increases naturally push earnings higher. And these are just federal taxes – there are, too 13 states the taxable portion of your services.

It is important to understand exactly what social security is designed to do for you in terms of providing income and to know if you are allowed to keep all the money in or not. So make sure you understand these two key rules, even though many of your peers do not.

The $ 18,984 social security bonus completely overlooks most retirees

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