Social Security can often seem confusing and complicated. At Johnson Brunetti, we aim to simplify this essential part of your financial planning. Joel Johnson, CFP® joins Retire Wiser with NBC Connecticut to share the three crucial aspects of Social Security that everyone should be aware of.

Understanding Social Security as a Financial Asset

Firstly, it’s important to view Social Security as a significant financial asset. Imagine it as a substantial account, potentially worth $400,000 to $500,000. Treating it as an important account rather than merely a stream of payments can significantly impact your approach to retirement planning.

The first key point is understanding the requirement of 40 credits for eligibility. To qualify for Social Security, you need 40 quarters of income, which amounts to 10 years. It’s crucial to ensure you’ve accumulated these credits to secure your benefits.

The Impact of Age on Your Benefits

Next, consider how your age influences your benefits. Many people know that delaying benefits can result in higher monthly payments. This increase is because the calculation considers your age, as it relates to your life expectancy. However, it’s vital to make informed decisions about when to begin receiving benefits, balancing the advantages of larger payments with your financial needs.

Taxation of Social Security Benefits

Lastly, a common misconception is that Social Security benefits are not taxed. This is not true for most people, particularly in regions like the Northeast, where additional income sources are often necessary for a comfortable retirement. Therefore, some of your Social Security benefits may be taxed. Understanding this and exploring strategies to minimize these taxes is essential.