4 Facts to Understand About Social Security
Social Security remains the largest source of retirement income for many retirees, making it crucial for everyone to grasp its fundamentals, even if you’re not yet eligible.
This week on Better Money, Eric Hogarth, CFP® discusses four essential facts you need to understand about Social Security.
#1. The Importance of Social Security
Whether it’s your entire retirement income or just a portion, Social Security impacts almost every American. Educating yourself on the system can prevent costly mistakes. Remember, some people might not receive benefits, but understanding the system is vital to avoid penalties.
#2. Timing Matters
When you choose to start taking benefits can significantly affect the amount you receive. If you begin collecting early, at age 62, you will receive less money than if you wait until your full retirement age of 66 or 67. Starting early can also lead to withheld benefits if your earnings exceed a certain threshold. However, if you wait until your full retirement age, you can continue working without facing penalties, maximizing your benefits.
#3. Medicare Premiums Impact
Increases in Medicare premiums can eat into your Social Security benefits, even with cost-of-living adjustments. This can be discouraging as rising living costs may offset any increases in benefits. It’s essential to stay mindful of these potential deductions to better plan your retirement finances.
#4. Taxes on Social Security Benefits
Up to 85% of your Social Security benefits might be taxable, depending on your income level. This so-called “cliff tax” means that surpassing a certain income threshold by even $1 could push you into a higher tax bracket, affecting all your benefits. Knowing these numbers and seeking professional advice from your financial advisor can help you navigate these complexities and avoid unexpected tax burdens.
Final Thoughts
Social Security is a vital component of retirement planning, alongside other forms of savings. By understanding these key points and seeking expert advice, you can make informed decisions and optimize your retirement benefits, ensuring a more secure and comfortable future.
Information presented in our podcasts is considered current as of the created date. Over time, some information presented may become stale. We recommend you consult with your Financial Professional before making any changes based on information contained here.
Johnson Brunetti is a marketing name for the businesses of JB Capital and JN Financial.
Investment Advisory Services offered through JB Capital, LLC. Insurance Products offered through JN Financial, LLC.
The guarantees provided by any type of insurance contract are based on the claims-paying ability of the insurance company.
Related Resources
-
Frequently Asked Social Security Questions
Almost every American is impacted by Social Security in some way, so it’s no wonder that it’s one of the most frequently asked topics in retirement planning. When and how you start taking benefits… -
How Much Money Can I Spend in Retirement?
“How much can my spouse and I realistically spend in retirement at age 62 with $1 million saved?” Today’s hypothetical couple is asking the very question that most pre-retirees ponder when gearing… -
What Should My Tax Plan Be at Age 65 with $1 Million?
Approaching retirement with $1 million saved is an impressive milestone, but turning those savings into a sustainable income stream requires careful planning. At age 65, many retirees face the cha… -
What to Consider Before Moving in Retirement
If you have the liberty to relocate in retirement, does that mean you should? Maybe you’re a snowbird who wants to live down South full-time, or maybe you want to stick it out in the cold and spen… -
Dodging the Tax Torpedo
When envisioning the next chapter of your life, the impact of taxes can often be overlooked or forgotten altogether. The reality is, without the proper planning, you may be at the mercy of an impe… -
What Habits Should I Unlearn Before I Retire?
Today’s insightful question explores the behavioral finance side of retirement planning – specifically, which financial habits you should leave in the rearview as you transition into retirement. … -
RMDs and You
Tax-deferred retirement accounts like IRAs and 401(k)s have allowed your savings to grow without any immediate tax burden. However, once you reach a certain age, the IRS requires you to begin maki… -
How to Financially Plan for a New Presidential Administration
A new presidential administration is set to take office next year, and while there are a lot of uncertainties around what a second Trump term could bring, it’s important to stay the course in your… -
Magic Retirement Number
Do you know your magic retirement number? This is the amount of money you need to retire – and it’s different for everyone. Let’s explore how to calculate your number, how it compares to the rest … -
Should I Consolidate My Multiple 401(k) Accounts?
If you’ve contributed to multiple 401(k) or other employer sponsored plans over the years, you may be wondering about today’s question, is it time to roll your old accounts into an IRA? In this we…
