Social Security TIps and Tricks

Social Security

Social Security is one of the most important sources of income for seniors and retirees. It can provide a significant amount of money each month. However, there are a lot of mistakes that people can make when they are dealing with Social Security, and it is important to understand how the program works and the best way to maximize benefits. Without the knowledge of how to get the most out of Social Security, you could miss out on over $100,000 in benefits. 

Social Security Calculator

One of the most important ways you can control your retirement planning is by calculating what your Social Security benefits will be before you start to receive them. That way, you can make plans about your investment strategy and other sources of income, like pensions, based on what you learn about your Social Security benefits. This is important because there are many ways you can change your income in retirement, such as by changing the amount you withdraw from savings and retirement accounts, which affect your quality of life and how long your resources will last. Knowing your benefits means you can integrate them into your retirement strategy. The best way to learn what your Social Security benefits will be is to use a Social Security calculator. There are several of these available online, including some from the Social Security Administration. There are several factors that affect what benefits you will receive, such as what you have paid into the Social Security system, other pensions or benefits that are coming to you, and the age at which you retire. It is not easy to understand how all of these factors interact on your own without the help of a calculator. When you use a Social Security calculator, then you can enter your relevant information and get an explanation of what your benefits should be. From there, you can go on to create your retirement strategy.

Social Security Income

Income from Social Security will be a crucial element in the retirement finances of most Americans. The benefits can total to a significant amount per month, and having a steady, dependable flow of cash that doesn't fluctuate from month to month is an important asset. This is because you can build the rest of your lifestyle around this money, knowing that you will always have this minimum to fall back on each month. It often is not enough to live on by itself, but Social Security income is large enough to supplement some other kind of income. After you leave the job market and retire, it is surprising just how much it helps to have a steady source of income. Without access to a full-time job, there are not many other ways to bring money into the house without drawing down on savings or investments. That comes with its own risks, which include the risk of running out of money through withdrawing too much or outliving your expectations. In either case, Social Security can provide a backup that means you will not be entirely reliant on your savings. Of course, this also varies for different people. Not everyone can manage to put aside a significant amount of money over the course of their lives- expenses and emergencies can make saving hard. Social Security income helps to fill in the gaps that ordinary saving could not fill. So while it is not helpful to anticipate being able to rely completely on Social Security, it functions perfectly as supplemental income for retirees.

Social Security Full Retirement Age

The Social Security Administration tries to save money by encouraging people to retire and start claiming their benefits later in life. To incentivize this choice, the SSA has set down rules that increase the benefits of people who retire late and decrease the benefits for people who retire early. The age at which you will become entitled to your full benefits upon retirement depends on when you were born. If you were born before 1938, then the full retirement age is 65. If you were born in or after 1938, then the age becomes higher. It tops out at 67: anyone born after 1959 will have a full retirement age of 67. The reason it has increased over time is that people are living longer. Medical advances mean that while originally, Social Security only covered a few years of life, now it covers many years. That also means that the cost of the program has increased significantly. Raising the full retirement age is one way to combat that rise in costs. The implications for you are that if you retire before your full retirement age, your benefits will be reduced. On the other hand, you can choose to delay your retirement and that entitles you to more benefits. Of course, the exact time of your retirement may not be entirely in control- the circumstances of your job and your health may affect when you retire. But in general delaying retirement so that you claim Social Security late and attain a larger monthly benefit is a better move. It also gives you more time earning a salary that you can add to your savings. 

Medicare Surtax

In the United States, most income is taxed in several ways for different purposes. One of the most common of these purposes is to fund the Medicare program. The surtax that funds Medicare gets taken out of most people's paychecks automatically. However, Social Security payments are an exception. They are not taxable income in the same way that a salary would be, so the Medicare surtax does not apply to it. This is good news for retirees, because having to pay taxes on Social Security benefits would significantly decrease their value as well as make it harder for beneficiaries to do their taxes. Social Security benefits, therefore, do not get larger and smaller based on taxes. While people with jobs will face changes in their pay when taxes go up or down, Social Security benefits are protected from this fluctuation. That is another way that Social Security payments are dependable- they are not exposed to changes in tax policy that would affect salary income. Any income that comes from a normally taxable source is still taxable, even if you are on Social Security. It is only the portion of your income that comes in the form of SS benefits that cannot be taxed. 

Social Security file and suspend

Suspending Social Security benefits is equivalent to telling the Administration that you wish to defer taking benefits until the age of 70. That entitles you to a significantly larger monthly benefit. The suspension will expire automatically when you turn 70, so there is no need to tell the Administration that you are now eligible for benefits again. The process is also reversible- you can remove your suspension and start taking Social Security immediately if you so choose. This is a good option to have, because even if you intend to delay your benefits by filing for suspension, you might experience a life change that leads you to alter your plans. In addition, this option is also available for couples. The way it works is that one couple files the suspension while the other couple applies for spousal benefits. This delays the benefits of both spouses at the same time. You can also decide to suspend payments after having already begun to receive them. In that sense, suspension acts like a switch that turns your benefits on and off, and after age 70 it is permanently on. The flexibility allows for many different choices depending on your personal situation. Suspending benefits lets you begin to accrue delayed retirement credits, and these entitle you to larger payments when you do decide to retire. This is attractive to many potential retirees, and it is in the interests of the SSA for more people to sign up for suspended payments for a few extra years. This cuts down on the overall costs of the program.

Structured settlement

A structured settlement is one of several potential outcomes from a lawsuit. If you win or settle a case like a workman's compensation suit and are entitled to a settlement, then the attorneys and you might agree to structure the settlement so that it will not interfere with your Social Security benefits. There are several approaches to this. In general, the money in a structured settlement is not taxable, so it will not be subjected to income tax or any other type of tax. However, it might affect your Social Security benefits because your financial status has changed. The SSA might lower your benefits for the duration of the structured settlement. As a result, it is common for our attorney to arrange for the payments from the settlement to start out smaller and then increase after you reach the age of 70. That way, the settlement will not displace any income from Social Security- the SS benefits will simply be suspended as long as possible, This approach will generally maximize the combined income you get both from the structured settlement and from the Social Security benefits you delayed. The work and calculations of this process will be carried out by the attorney, so there is no need to attempt to do it yourself. The bottom line is that a good attorney will take the possibility of Social Security into account when deciding how to set up your settlement. The exact nature of the setup will differ for each person because their finances and age will affect the best strategy for the attorney to peruse, but the basic reasoning is always the same: to maximize the money you get.

Social Security benefits 

Social Security benefits take the form of a monthly check. The amount of money in the check varies based on several factors, but they boil down to counting your credits. You earn credits by paying taxes into the Social Security system. You can also add delayed retirement credits to your account by suspending your Social Security benefits until you turn 70. The more credits you have, the more you will get per month. In effect, Social Security is a forced savings mechanism- the government taxes you as you earn money and then hands it back to you when you retire. One complication is that you do not receive the same money you paid into the system when you were working. Instead, you receive the taxes that workers are paying now. Social Security doesn't hold onto your money until you retire- it uses it to pay benefits for current retirees. Unfortunately, that means that Social Security benefits are technically at risk if the laws government Social Security taxes change. A law that changes current taxation could affect the benefits of current recipients unless the government specifies otherwise. Putting that aside, though, Social Security benefits are an important source of income for many seniors. They are a steady stream of money at a time when most Americans no longer work and have to fall back on their savings. Furthermore, the savings rate in America is comparatively low, so it is useful to have an automatic savings policy to provide for people as they age. 

With this knowledge, you should be well equipped to take full advantage of your Social Security benefits. Keep in mind the potential gains from suspending your benefits, and balance that against the extra time you need to spend working. There is no best answer that works for everyone. However, the general principles of SS benefits as steady income that are more valuable the later you take them always holds, even for couples. Make sure that whatever you decide to do, you make a plan. Having any plan is better than no plan at all when it comes to spending and saving money in retirement, because it is very hard to get out of a bad situation once you have retired. You may want to purchase a Medicare Supplement Plan to go along with your SSI.