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Sacramento Boomer

Learn The Basics of Your Social Security Benefits

For the millions of older Americans considering leaving the workforce who will be accessing their Social Security (SS) benefits—you are not alone. This year, about 64 million Americans will receive over 1 trillion dollars in SS benefits, according to the Social Security Administration (SSA) website. 

Nearly nine out of 10 individuals aged 65 and above collect SS payments, and yet the process can be fraught with uncertainty and anxiety. So, what should be your criteria for taking the leap of faith into your golden years? We consulted experts and the SSA for their top tips.

Number one on the list? “Hold off as long as possible,” says John Zezini, CFP, at Granite Bay Wealth Management. “There are always factors one needs to consider, including health and the strength of your portfolio, but if a person can wait, SS benefits compound at eight percent annually from age 62 until age 70.” 

Here are some other tips—courtesy of U.S. News & World Report’s Senior Retirement Editor Emily Brandon’s article “10 Ways to Increase Your Social Security Payments” and the SSA website—to consider:

Work for at least 35 years.

SS benefits are calculated based on the 35 years in which you earn the most. If you don't work for at least 35 years, zeros are factored into the calculation, which decreases your payout.

• Work until your full retirement age.

It would be best if you claimed SS at your full retirement age, which is 66 or 67 for most current workers, to get your total payments. Monthly payments are permanently reduced for people who sign up for Social Security before their full
retirement age.

• Claim spousal payments.

Spouses may claim benefits based on their work record or up to 50 percent of the higher earner’s benefit, whichever is more. If you were married for at least 10 years, you could also claim SS benefits based on an ex-spouse’s work record.

• Don’t earn too much in retirement.

SS beneficiaries under their full retirement age who earn more than $17,640 this year will have $1 withheld for every $2 they earn above the limit. The year you turn your full retirement age, the earnings limit jumps to $46,920, and the penalty decreases to $1 withheld for every $3 earned above the threshold. (The good news is you can make up to that $17,640 without any reduction in your SS benefits.)

• Minimize Social Security taxes.

If the sum of your adjusted gross income, nontaxable interest, and half of your SS benefits are more than $25,000 for individuals and $32,000 for couples, up to 50 percent of your benefits could be taxable. If these income sources top $34,000 ($44,000 for couples), income tax could be due on as much as 85 percent.

If your goal is to maintain a pre-retirement lifestyle, “a good rule of thumb is 70 percent of your past annual income should be your target and drawing less than four to six percent from your portfolio annually,” Zezini adds.

Whatever your portfolio status, following these strategies can help you flourish in life’s next adventure.

By Lorn Randall