- How to Have a Comfortable Retirement on Social Security Alone
- Op-Ed: We can't afford to expand social security – and we don't need to - Los Angeles Times
- Types of Social Security Benefits
Age 62 is the first point at which people are able to take their benefits. But because they are taking those payments early, those checks will be permanently reduced. Age 66 or 67 is generally considered full retirement age, depending on the year in which you were born. At that point, you are eligible to receive percent of your benefit. If you delay beyond that, up until age 70, your benefit will grow by up to about 8 percent per year for every year you delay. When deciding when to claim benefits, you should weigh your health, financial situation and marital status. In order to factor in how taxes affect your claiming decision, you need to understand the specific tax rules related to Social Security.
The good news for retirees is that not all of your benefits will be subject to federal income taxes. Those taxes usually kick in when you have other income — such as wages, interest or dividends — in addition to your benefits. The way in which Social Security benefits are taxed was determined by changes Congress made to Social Security in At that time, the first income threshold was created, whereby up to 50 percent of benefits were subject to federal income taxes.
Yet, inflation has increased by an average of 2.
How to Have a Comfortable Retirement on Social Security Alone
So while your Social Security benefit is adjusted for inflation and your earned income often also goes up with inflation, the threshold at which you pay tax on Social Security hasn't changed. While it is possible to avoid taxes on Social Security benefits, it is very difficult to keep your income low enough to make that happen. For people who have other income, the easiest way to control taxes on Social Security is to delay taking your benefits, according to John Piershale, wealth advisor at Piershale Financial Group.
Keep in mind that if you do have earned income and you claim your Social Security benefits at 62, you will be subject to tax on that income.
And you will receive higher monthly benefits if you delay between age 62 and full retirement age because of work, Olavsrud said. If you think you will owe taxes, you have two options. You can have the Social Security Administration withhold part of your benefits, or you can pay quarterly taxes. Using a calculator from the IRS can help give you a sense of how much of your benefit is taxable, said Stuart Ritter, senior financial planner at T. Rowe Price. Believing these Social Security myths could make you poorer in retirement.
If you can't wait until 70, this is the next best age to claim Social Security benefits. Here's why your Social Security check doesn't go as far as it once did. Sign up for free newsletters and get more CNBC delivered to your inbox.
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Given the overwhelming popularity of Social Security, politicians have long been reluctant to tinker with the program. By the trust fund reserves are expected to be depleted. At that point, Social Security would be able to pay out about 75 percent of scheduled benefits. Lawmakers in Washington always seem to be debating ways to shore up the program.
Op-Ed: We can't afford to expand social security – and we don't need to - Los Angeles Times
But whatever the future of the program holds, it important to understand the limits of Social Security benefits. Clearly, building your personal savings—especially in a tax-advantaged account, such as a k or IRA—is an increasingly important piece of retirement planning. Using the savings tools at myretirementpaycheck. Mary C. Her areas of expertise include personal finance, aging, health and children's and family issues.
Become a Member. Sign In. Remember Me. Not a member? Need further assistance? Please call Member Services at Join Consumer Reports. Already a member? Welcome to Consumer Reports. You now have access to benefits that can help you choose right, be safe and stay informed. Get Started. How Social Security Will Change in Whether you're paying into the program or collecting benefits now, these tweaks will affect you. By Mary C.
Types of Social Security Benefits
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