Seniors, can we talk?
Let’s talk about your Social Security benefits – when is the best time to start your Social Security? Do I have to pay taxes on it? Is it going to be enough? Most retirement advice focuses on how to save enough money for your later years and how to make the best use of your pension (if you’re lucky enough to have one). For many the most confusing part of retirement planning is our Social Security benefit. “When should I start taking my Social Security? As soon as I’m eligible?” Taking Social Security benefits at “the right time” depends on your situation. You may be surprised to know that you can actually start receiving Social Security benefits as early as 62. Most people do not and most financial advisors suggest this could be a mistake. Every year you wait through age 70 will make your monthly check more. One person said if they retire this year at their full retirement age they would be eligible for a maximum monthly benefit of $2.663. If they had taken their benefits at age 62, they would only have received $1,997 – over 33% less. Waiting to age 70 may not be right for you. If you can’t live without that money or if you have health issues or family history of dying young, you may want to take benefits earlier. Even if your benefits increased 8 percent (8%) a year, if you’re not around to collect that higher amount it certainly didn’t help you. What if you are married and never paid into Social Security? You can still get benefits equal to half of your spouse’s benefits. A friend of mine was married 11 years and has been divorced for 30 years. Since she never remarried, she’s eligible for spousal benefits from her ex-husband. Do you have to pay taxes on your Social Security retirement benefits? If Social Security is your only source of income, your retirement benefits typically are not taxable and you probably do not need to file a federal income tax return. If you have sources of income in addition to Social Security, then you may have to pay taxes on your Social Security benefits. Those additional sources of income include wages, self employment income, interest and dividends, pension income and IRA/401(k) withdrawals. Since I am not a tax advisor, I suggest that you contact your tax advisor for details related to your situation. Will I be able to retire and live on my Social Security? Even though Social Security was only intended to supplement your retirement income, most intend to fund their retirement with their Social Security payments. This makes Social Security more popular as a funding source than a 401 (k) plan, pension or investment portfolios. Social Security may not be enough to provide the pre-retirement lifestyle you have. The average monthly benefit in January 2014 was a little over $15,000 annually. Got something you’d like to talk about? Call 501-868-6650 and say “Caroline, can we talk?” Originally Published May 2015
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AuthorCaroline Beauchamp specializes in personalized life and health insurance solutions. Archives
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