Some of the most important decisions you will make regarding your retirement surround Social Security. Despite this, many in our area, including Raleigh, Cary, and Durham, as well as nationwide, make quick decisions that end up costing them money they might not be able to afford losing. Here are a few general ideas to consider on Social Security that will help you maximize your benefits.
- Don’t forget to pay your taxes – It may seem irrational to receive money from the federal government and then turn around and give it right back, but Social Security benefits are counted as taxable income. Below a certain level the benefits will be safe, but otherwise, expect to pay some. A maximum of 85 percent of these benefits can be counted on as taxable, though, depending on how much you make and how you file.
- Full Retirement Age is no longer 65 – If you were born before 1943, the retirement age is still 65, but most in that age range have already begun taking their benefits. That’s changed for those born between 1943 and 1954, though, who actually cannot take full retirement until 66. Those born after 1960 will even have to wait until 67, so it’s important to know when your FRA begins when planning retirement. For those born between 1955 and 1959 they retire at varying ages between 66 and 67.
So, the retirement ages are:
- Before 1943: 65 years
- 1943 – 1954: 66 years
- 1955: 66 years and 2 months
- 1956: 66 years and 4 months
- 1957: 66 years and 6 months
- 1958: 66 years and 8 months
- 1959: 66 years and 10 months
- 1960 and up: 67 years
- You can file for Social Security benefits early, but with reduced payments – It is possible to begin taking your benefits before the Full Retirement Age, but be careful. Taking them early means receiving a reduced benefit. This could affect your spouse’s benefit, as well. Some possible reasons to take it early are if you have a deep, immediate financial need, like a health problem, if you do not anticipate living past 75, or if you are a lesser earning spouse who can take it strategically. Speak to an advisor before making this sensitive decision, though.
- You can have your Medicare premiums taken from your Social Security check – Often, in retirement, the simpler your bills and other details can be made, the better. Because Medicare is administered from the Social Security office, you can request to have your premiums simply taken from your total Social Security benefits. In fact, this is so convenient that most retirees end up doing it this way.
- Going back to work may be counter-productive – If you are retired and receiving benefits, but want a little more cash coming in, don’t assume taking a job is the right answer. Even taking a part-time job can end up penalizing you and erasing any new earnings you would have made.
- If you are no longer married, you may be able to claim a higher-earning former spouse’s benefit level – It’s often the case that one spouse earned significantly more than another. Those who relied on their spouse for many years, and then either had the marriage dissolve, or have outlived their spouse, can find themselves feeling vulnerable. Thankfully, those higher benefits often remain available to them even when they are no longer married. For those divorcing, these benefits are available if the marriage lasted for over 10 years and without remarriage before age 60.
These are some general principles to keep in mind, but the details of each may differ depending on your unique circumstances. Call or visit Cardinal Advisors in Cary, North Carolina near Raleigh, NC to have a custom Social Security timing plan made for you.
Hans Scheil is the author of “The Complete Cardinal Guide to Planning for and Living in Retirement” and the accompanying workbook. He can be reached at Hans@CardinalGuide.com.