As retirement age begins to approach, it is inevitable that a lot of questions will start to pop up. Many of these issues are likely to involve Social benefitswhen you are eligible to receive them, when you should start receiving them, and how to include them in a manageable budget to get the most out of your life after retirement.
While there is no one-size-fits-all solution to these issues – given that everyone’s personal needs, budget and circumstances will vary – there are some guidelines to follow. Here’s a look at some things to keep in mind when you reach retirement age and how to best tailor them to suit your needs.
What age should you be
The age at which you are allowed to receive social security benefits is not cut and dried at all. While the retirement age is still considered 65 or 67 if you were born after 1960, benefits can start to be received anywhere from 62 years to 70 years.
Granted, when you decide to start collecting, it will ultimately affect amount you receive. The earlier you take them, the smaller the steps. If you take them later, the amount you receive will increase. There is no right or wrong approach, but it should be something to consider when making a decision.
When to stop working
While this is often the case, the age at which you start charging benefits is not necessarily the same age at which you actually stop working. How you choose to approach this situation will also affect the amount of money you receive.
Your social security payments are ultimately determined by the best 35 years of earnings in your professional life. If you stop working before the age at which the benefits start, those years are marked as zero income, which may lower the benefits you receive. Conversely, the longer you work in high-income jobs, the lucrative years can replace previous years with lower incomes, which will increase your benefits.
When to sign up for Medicare
No matter when you plan to let your services begin and decide to stop working, it is still recommended that you apply for Medicare within three months of turning 65. If you start receiving benefits on or before that birthday, you will be automatically enrolled.
However, if you postpone the benefits for a year or more, signing up for Medicare later can make certain aspects of your benefits more expensive, starting with a penalty for late enrollment. Another consideration is whether you or your spouse are still working somewhere with an employer-offered group nursing scheme. It can save you a fine for late enrollment depending on when the employment ends.
Your spouse’s situation
When we talk about hiring a spouse, there are additional things to consider if you are married. For example, higher wage earners are generally encouraged to defer social security because of the increased payment you will receive. This also applies if a spouse with a larger income dies first, which means that their former partner is also entitled to a larger payment.
In some cases, spouses who have since divorced may also collect based on their previous earnings. However, it can vary greatly depending on where you live as well as other factors.
This is what your health looks like
With so many decisions about when to start collecting social security, the question of your personal longevity inevitably comes into play. Obviously no one can know for sure what the future holds, but based on some recent diagnoses and factors like blood pressure, cholesterol levels, weight and family history, it can help give you an idea.
Often, when you start collecting benefits, you should be informed about what kind of result you can expect considering your personal health.
This is how you get taxed
While all possible factors will go into determining the actual amount you start receiving, you may end up owing tax on it in April. While the first 15 percent of your benefits are not taxed regardless, there are a formula to keep in mind that it can help you gain a better insight into what is coming. Take your adjusted gross income, add any non-taxable income as municipal bond interest, and add it to half of your total social benefits. The sum determines what tax you pay.
While taxes on benefits are usually reserved for high-income earners, tax rates change, so keep in mind that the lower your overall income rating, the less likely you are to hit them in the future.
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This article was originally published on GOBankingRates.com: What you need to know about social security when you are of retirement age