Here’s What You Need to Know About Social Security
Social Security is an important piece to the retirement puzzle. In fact, Social Security reaches nearly every family in America at some point in their lives.
Even though it is such a prominent piece of retirement, there are still many common misconceptions about Social Security, and many opinions as to what the best strategy is when it comes to claiming benefits. But everyone’s portfolio is different, which means that your Social Security strategy should be unique to your wants and needs in retirement.
Here’s what you need to know in order to make the most out of your Social Security benefits:
- Know Your Full Retirement Age. Traditionally, people become eligible to claim at age 62, but this doesn’t mean that is when your benefits will be their highest. Actually, your benefits will continue to increase each year until you reach your full retirement age.
- Calculate Your Benefits. Social Security eligibility is based on credits. Once you earn 40 “credits” you may become eligible to claim. You can earn up to 4 of these credits a year based on your earnings threshold. If you do the math, it seems like you only have to work 10 years to get benefits. However, when it comes time to claim, your benefits will be based off of your highest earning 35 years. If you only work 10 years, the other years will be factored in as zero-income and your earnings will be lower.
- Know Your Spousal Benefits. For married couples, you have two choices when it comes time to claim. You can either take your own benefits of half of your spouses, whichever is greater.
- Understand Taxes. Your Social Security benefits may be taxed depending on whether you have additional income sources. For example, if you and your spouse have a combined income of over $44,000 and are filing jointly, you may be taxed on up to 85% of your benefits. This is a significant number, which is why it’s important to factor into your Social Security plan.
Just like any aspect of retirement, navigating Social Security benefits can be overwhelming. With so many moving parts to factor in and rules changing every year, it helps to have someone on your side to guide you to the best path for you. Whether you want to claim early or wait until you’re 70, SHP can help you create a unique plan that maximizes your benefits.
