The adage “It’s not what you make, but what you keep” applies to your Social Security benefits in retirement as much as to your paycheck when you were working. How much of your Social Security benefit you actually put in your pocket depends on your income, when you start taking benefits and other factors.
The best way for many people to put more Social Security money in their pocket may be to delay benefits up to age 70. However, that may not be possible or even the best choice for everyone.
If that describes you, consider these 7 strategies to get more retirement income from Social Security.
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For the past 40 years or more you have paid into the Social Security system with the promise that someday when you retire, you will receive a guaranteed monthly income for the rest of your life. Along the way, your employer has kicked in a matching contribution equal to 100% of your contribution.
At the end of your working life there should be a giant pile of cash with your name on it. And there is (figuratively speaking anyway). But it comes with a giant string attached.
In this case, the catch is that up to 85% of your monthly benefit is considered taxable income once it’s paid out to you. What’s more, depending on the state you live in, you may owe state income tax on those benefits as well. (Bad news fellow Minnesotans. We live in one of those states).
The following post will explain how much of your benefit is taxable and what, if anything, you can do about it.
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My last post argued that you may be better off to delay the receipt of your Social Security benefits to age 70. Taking benefits earlier results in a lower monthly payment, and likely a lower total amount of benefits paid out over your lifetime.
Of course, that is not always the case. To determine your optimal beginning date, you will need to do some research. Fortunately, the Social Security Administration makes this easy to do on their website.
You will find their retirement benefits calculators here.
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“When Is the best time to start taking Social Security benefits?” Retiring clients ask me this question more than just about any other. I often answer them with two questions of my own, “How long do you think you will live”? And, “Can you afford to delay receiving benefits?”
How Social Security benefits work
Most people receive their full social security benefit somewhere between age 66 and 67, also known as Full Retirement Age (FRA). Generally, benefits may be taken as early as age 62, but it comes with a price.
August 14th marks the 83rd Anniversary of Social Security. To mark the milestone I will be posting additional content throughout the month of August regarding social security benefits and how it effects your retirement plan.
To kick things off, check out this short video describing how your social security retirement benefits are calculated and why it may pay to wait.