If you’re planning for your future or already approaching your retirement age, you’d want to know how to ensure a secure income in case a disability prevents you from working or once you retire. For this reason, it’s essential to understand the social security basics to experience peace of mind.
Social security offers retired workers income after retirement and could also provide essential benefits to the dependents of deceased or disabled workers. Basically, it’s an earned benefit funded through your payroll taxes. To qualify for social security benefits, you need to pay the system by working a decade or more.
The benefits you get will be influenced by how much you pay when working. The availability and size of your benefits can be impacted by some factors as well, like whether you take late, full, or early retirement. To to get maximum social security benefit, here are the essential bits of info that you should know:
Social Security Is More Than Just A Retirement Program
While social security beneficiaries are mostly comprised of older people, there are other beneficiaries outside that age range, like children of deceased workers. The risk of premature death or disability is greater than most people realize. In fact, recent entrants to the labor force may become disabled or die before reaching their full retirement age.
Workers mainly get life insurance and disability insurance protection by making payroll tax contributions. For instance, for young workers with average earnings, two children, and a spouse, social security benefits are equivalent to a life insurance policy that’s over USD$725,000. People aged 21 to 64 who work in covered employment are also insured through social security in case of disability.
Social Security Is Especially Essential For Women
When planning for retirement, women may benefit more from social security. It’s because women tend to spend more time out of the paid workforce, earn less than men, accumulate less savings, live longer, and get smaller pensions. So, whether you’re married or not, it may come in handy when you have to consider social security.
You Can Be Eligible For Three Types Of Benefits
As mentioned earlier, if you have paid social security taxes and worked for more than a decade, you’ll be eligible for a worker’s benefit. If you’re married, you can be eligible for spousal benefits. In case your spouse dies, you’ll qualify for a survivor benefit.
The possibility of getting those types of benefits depends on serious planning and claiming strategies. A strategy like ‘claim and suspend’ is available as an option for beneficiaries. In addition, couples must plan ahead to maximize the potential survivor benefit.
You may want to consult a planner to help you determine which claiming strategy is best for your situation. This is because the claiming process can be complex if you want to get the most out of your benefits, and professional help may greatly increase the chances of getting everything, even if it’s an additional expense on your part.
It Pays To Delay
When you reach your full retirement age, you may opt to wait to take your benefits. There’s a huge bonus to delay your claim because your benefit may grow by 8 percent until you reach 70 years of age.
While spousal benefits don’t include delayed retirement credits, survivor benefits do. If you wait to take your spouse’s benefit, you can ensure that you’ll receive higher benefits. The extra income of up to 32% can make a difference for people whose household is down to a single social security benefit.
In other cases, spouses delaying their partner’s benefit but wanting to bring extra social security income into their household may restrict their partner’s application to spousal benefits only. A spouse restricting their application should be at full retirement age to get the best results using this strategy.
You Can Work While Getting Social Security
If you’re still under 63 years old, you have an option to take social security. Social Security Administration (SSA) sets generally set annual earnings limits. For example, if you’re getting social security benefits before your retirement age and you earn more than the limit, your monthly benefit payment will be reduced based on how much you earn.
However, the good news is that you won’t lose all your social security benefits. Instead, the amount of your payment will be recalculated, so you’ll get the withheld money when you reach your retirement age.
Marital Status May Impact Your Benefits
Married couples must coordinate with each other when deciding when to start claiming social security benefits. The choices they make may affect each other’s retirement income, what income will be left in case their partner dies, or the taxes they need to pay on their benefits.
While the surviving spouse may get more benefits, receiving small amounts of cash more frequently might not be possible. For individuals with fixed incomes, it can be a devastating financial blow. Therefore, making smart choices with the higher earner’s benefits is crucial. You should be careful with your claiming strategies because these can be a lifesaver for the surviving spouse in the long run.
Remarriage and divorce may also affect the benefits you’re eligible for. Both spouses may get benefits if the couple was married for at least a decade before the divorce. However, this option may go away if the ex-spouse has remarried.
Social Security Benefits Could Be Taxed
Several beneficiaries end up paying taxes on their benefits. It depends on the listed earnings on their income tax return. For example, if you file for more than USD$25,000, you’ll need to pay federal income taxes. However, the rules may vary from one state to another. Consult a professional to help you understand the taxes associated with social security benefits.
Applying for social security can be a tricky process. You have to remember that there are countless variables to consider and several options to ponder. Your decisions will also determine how small or big your monthly check will be. Keep these essentials in mind and get help from a professional if necessary if you want to get the biggest benefits given your circumstances.