PLANNING for retirement can be stressful and mistakes can be made easily.
There is a wealth of confusing economic jargon, and it can deter many people from making a retirement or financial plan for themselves.
Whether you plan to trust fully Social Security in retirement or to supplement other income, it is important to know how to maximize cash.
To help, we pick up eight mistakes that can cost you a significant portion of the money for the rest of your life.
1. Do not control your earnings
The first mistake you will not make is not checking your earnings.
Your earnings give you an idea of how much your social benefits will be, making it easier to plan for retirement.
By checking this number on an annual basis, you can also identify any errors that may appear over time.
If you discover errors early, it allows you to correct the errors by gathering evidence of your earnings, such as your W-2 or payslips, and sending them to the Social Security Administration (SSA).
Once SSA has confirmed your claim, it will correct your registration.
Along with correcting mistakes, your earnings will help you identify if you need to put more money into investments and retirement accounts.
2. Does not work long enough
The next mistake you will not make is not working long enough if you are able to avoid it.
To qualify for Social Security retirement benefits, you must have at least 40 work credits.
You can earn up to four credits each year based on your earnings – and by 2022, you’ll need to earn $ 1,510 to get one credit.
Social security benefits are also calculated based on your 35 highest earning years.
As you approach retirement, you should check your earnings statement to make sure you have enough credits to qualify for social benefits.
If you do not already have 35 years of earnings, you may want to consider working an extra year or two to help increase your social benefits.
If you work less than 35 years, you will have $ 0 included in the benefit calculation, which will reduce your monthly payments.
Demands for social security prematurely or waiting too long
Another mistake is to claim your social benefits too early or wait too long.
If you apply as early as possible, which is 62 years, your benefit amount will be permanently reduced by up to 30%.
If you decide to apply until your full retirement age (OFF), you will receive 100% of the monthly benefit.
If you defer the unemployment benefit to the age of 70, you can get an extra 32% every month.
However, you do not want to wait too long to claim where you end up putting yourself in a difficult financial situation.
Many people are not aware of how big a factor timing plays in getting social security benefits, and this is one of the many reasons why it is important to have a retirement plan drawn up for yourself.
4. Only considering your own benefits
In addition to applying too early or too late, many people only consider their own benefits when thinking about retirement.
But if a person is married, one is also entitled to collect spousal benefits.
A spouse’s benefit can be up to 50% of your spouse’s full retirement age amount.
Claiming spousal benefits will not only provide you with some income, but it will also allow you to keep your social security benefits from growing.
Considering another person’s benefits could also be a good idea for a couple who decided to have a stay-at-home parent and a working parent.
The stay-at-home parent may not have earned enough work credits to qualify for their own social benefits, but the stay-at-home parent could still receive social benefits under the working spouse.
5. Does not plan taxes on social benefits
Depending on your individual circumstances, you may have to pay federal tax up to 85% of your benefits.
This usually happens if you have another significant income on top of your benefits – for example, salary, self-employed income, interest, dividends or other taxable income.
Every January, you should receive a statement of social benefits showing the amount you received in the previous year.
You can then use this benefit statement if and when you file a federal tax return to find out if your welfare benefits are taxable.
A person should always proactively plan the tax season by looking at one’s earnings and talking to tax professional and financial advisors.
To remarry without knowing how it will affect social security benefits
Fortunately, remarriage does not affect a person Social Security pension benefits.
This is because these payments are calculated based on your and your spouse’s individual earnings history.
On the other hand, remarriage affects your survivor and SSI benefits.
So if these are sources of income that you are heavily dependent on, then you might want to reconsider the time of getting married again.
7. Provided that social security benefits can fully cover the cost of living
Retirees should not expect to use their social benefits as a primary source of income in their golden years because health care expenses can eat up about 30% of the check.
According to one AARP report from December 2021, retirees will pay an average of $ 6,168 per year on health care expenses.
It seems to be $ 514 a month.
Meanwhile, the average social security benefit in 2022 is $ 1,657 per year. month.
8. Ignores ‘work rules’ for early benefits
The last mistake many people make is not taking “work rules” into account for early benefits.
If a person decides to claim social security benefits early and continues to work, the benefits will be reduced by $ 1 for every $ 2 a person earns above the annual limit.
In 2022, the annual limit for employees is younger than FROM $ 19,560.
If you reach FROM in 2022, the limit for your earnings in the months before full retirement age is $ 51,960.
In that case, $ 1 will be withheld for every $ 3 earned above this threshold.
In addition to these tips, The Sun spoke with Professor Laurence J. Kotlikoff about ways you can maximize your social benefits.
The sun also explains how more than 217 million Americans risk cutting their social security benefits.
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