Social Security benefits play a crucial role in ensuring a stable and secure retirement. For many retirees, understanding how to maximize these benefits is essential for financial well-being. This comprehensive guide will explore various strategies to help you get the most out of your Social Security benefits, ensuring a safe and secure retirement. We’ll cover the basics of Social Security, when to claim your benefits, secure strategies to maximize them, common pitfalls to avoid, and how to integrate Social Security with other income sources.

Understanding Social Security

Social Security benefits are designed to provide financial support during retirement. The amount you receive depends on your earnings history and the age at which you claim your benefits. The Social Security Administration (SSA) calculates your benefit based on your highest 35 years of earnings. Understanding how your benefits are calculated is the first step in maximizing them.

When to Claim Social Security

One of the most critical decisions you’ll make is when to start claiming your Social Security benefits. You can begin claiming as early as age 62, but doing so will permanently reduce your monthly benefit. Conversely, delaying your claim past your full retirement age (FRA) increases your benefit by 8% per year until age 70.

Full Retirement Age vs. Early vs. Delayed Benefits

• Full Retirement Age (FRA): Your FRA is based on your birth year. For those born between 1943 and 1954, it’s 66. For those born in 1960 or later, it’s 67.
• Early Benefits: Claiming at age 62 reduces your monthly benefit by about 25-30%.
• Delayed Benefits: Each year you delay past your FRA increases your benefit by 8%, up to age 70.

Secure Strategies to Maximize Benefits

To maximize your Social Security benefits securely, consider the following strategies:

Spousal Benefits

Spousal benefits can be a valuable part of your Social Security strategy. If you’re married, you can claim either your own benefit or up to 50% of your spouse’s benefit, whichever is higher. This can be particularly beneficial if one spouse has significantly lower earnings.

Maximizing Survivor Benefits

If you’re widowed, you can claim survivor benefits as early as age 60 (or 50 if disabled). Survivor benefits can be up to 100% of your deceased spouse’s benefit. It’s crucial to understand the rules and optimize the timing to ensure you receive the highest possible benefit. Survivor benefits are designed to provide financial support to widows and widowers based on their deceased spouse’s earnings. Here are the key rules and strategies to maximize these benefits:

Eligibility for Survivor Benefits

Age Requirements:

• Early Benefits: You can start receiving survivor benefits as early as age 60.
• Disability Exception: If you are disabled, you can begin receiving benefits as early as age 50.
• Caring for a Child: If you are caring for a child under age 16 or who is disabled, you can receive benefits at any age.
• Marriage Duration: To qualify, your marriage must have lasted at least nine months unless the death was accidental or occurred in the line of duty (military).

Social Security Benefit Amounts

• Full Benefits: If you wait until your full retirement age (FRA), you can receive 100% of your deceased spouse’s benefit amount.
• Reduced Benefits: If you start claiming before your FRA, your benefit amount will be reduced:
• Age 60 to FRA: The benefit will be reduced to as low as 71.5% of the deceased spouse’s benefit if claimed at age 60.
• Between 60 and FRA: The reduction is less severe the closer you are to FRA.

Maximizing Strategies

• Delay Benefits for Higher Payments: If financially feasible, delaying survivor benefits until your FRA ensures you receive the maximum possible amount.
• Consider Your Own Benefits: If you qualify for benefits based on your own earnings, compare the amounts. You can switch from survivor benefits to your own retirement benefits later if your own benefits would be higher.
• Work and Benefits: If you are under FRA and continue to work while receiving survivor benefits, your benefits may be reduced if your earnings exceed certain limits. Once you reach FRA, your earnings do not affect your survivor benefits.

Coordination with Your Own Social Security Benefits

• Switching Benefits: You can start with one type of benefit (e.g., survivor benefits) and switch to another (e.g., your own retirement benefits) at a later time if it results in a higher overall benefit.

Example Strategy:

• Age 60: Start receiving reduced survivor benefits.
• Age 70: Switch to your own retirement benefits, which will have grown due to delayed retirement credits.

Special Considerations

• Remarriage: Remarrying before age 60 will disqualify you from receiving survivor benefits based on your deceased spouse’s record. If you remarry after age 60, you can still receive survivor benefits.
• Government Pension Offset (GPO): If you receive a pension from a federal, state, or local government based on work where you did not pay Social Security taxes, your survivor benefits may be reduced.

Additional Tips

• Understand Your FRA: Know your FRA for survivor benefits, as it may differ from your FRA for retirement benefits.
• Plan for Long-Term Needs: Consider your long-term financial needs and health prospects when deciding when to claim survivor benefits.
• Seek Professional Advice: Consulting a financial planner can help you navigate the complexities and make the most informed decision based on your unique situation.

Impact of Continuing to Work

If you continue to work while receiving Social Security benefits before reaching your FRA, your benefits may be temporarily reduced. However, these reductions are not permanent. Once you reach your FRA, the SSA will recalculate your benefit to give you credit for the months when benefits were withheld.

Avoiding Common Pitfalls

To secure your retirement, avoid these common Social Security pitfalls:

Timing and Claiming Mistakes

One of the biggest mistakes retirees make is claiming Social Security benefits too early without fully understanding the long-term implications. Claiming Social Security as soon as you become eligible at age 62 might seem attractive, especially if you want to retire early. However, doing so can permanently reduce your monthly benefit by up to 30%. This reduction affects not just your current income but also your financial stability throughout retirement.

Understanding the Impact of Early Claiming

When you claim Social Security benefits before reaching your Full Retirement Age (FRA), which is 66 or 67 depending on your birth year, you receive a reduced benefit for the rest of your life. Here’s a breakdown of how early claiming impacts your benefits:

• Age 62: You can claim benefits at this age, but your monthly benefit will be reduced by about 25-30%.
• Full Retirement Age (FRA): Claiming at FRA (66 or 67) entitles you to 100% of your calculated benefits.
• Delaying Benefits: For each year you delay claiming past your FRA until age 70, your benefit increases by about 8%. This means you could receive up to 132% of your benefit if you wait until age 70.

Strategies to Avoid Early Claiming Mistakes

If you have the financial resources and want to retire before your FRA, it’s crucial to tap into other assets to subsidize the period until you start receiving full Social Security benefits. This strategy not only provides you with the income you need but also results in a significant increase in your monthly Social Security benefits when you do start claiming them.

Using Annuities to Bridge the Gap

Annuities are a popular financial vehicle that can help provide a steady income stream if you decide to retire before reaching your FRA. Here’s how you can use annuities to your advantage:

• Purchase an Immediate Annuity: An immediate annuity provides you with guaranteed income payments starting immediately after you make a lump-sum investment. This income can cover your expenses until you decide to start claiming Social Security benefits.
• Deferred Annuities: You can also opt for a deferred annuity, which begins payments at a future date. This can be particularly useful if you want to delay claiming Social Security benefits for several years to maximize your monthly benefit.
• Bridge the Income Gap: By using the income from an annuity, you can retire early without having to claim Social Security benefits right away. This allows your Social Security benefits to grow, ensuring you receive a higher monthly benefit when you finally start claiming.

Example Scenario

Imagine you’re considering retirement at age 62, but you know that claiming Social Security benefits at this age will reduce your monthly benefit by 30%. Instead of claiming early, you decide to use other retirement savings and purchase an immediate annuity or use income from an annuity you purchased years ago to cover your living expenses until you reach age 70. By doing this, you allow your Social Security benefits to grow by 8% each year beyond your FRA. When you start claiming at age 70, you receive 132% of your full benefit, significantly enhancing your financial security in the long term.

Financial Considerations

Before deciding to use annuities or other assets to delay claiming Social Security benefits, consider the following:

• Current Financial Needs: Assess your immediate financial needs and determine if you have sufficient savings or retirement accounts to cover expenses.
• Health Prospects: If you have health concerns or a shorter life expectancy, it might make sense to claim Social Security benefits earlier.
• Longevity Planning: For those with a longer life expectancy, delaying Social Security can provide substantial financial benefits over the long term.

Expert Advice

Consulting with a financial advisor can help you develop a personalized strategy that aligns with your financial goals and retirement plans. An advisor can help you evaluate the pros and cons of using annuities or other investment vehicles to bridge the income gap and maximize your Social Security benefits.

Misunderstanding Rules and Regulations

Social Security rules can be complex. Misunderstanding these rules can lead to missed opportunities and reduced benefits. It’s vital to stay informed about changes in Social Security regulations and how they affect your benefits.

Ensuring Compliance with Social Security Regulations

Failing to comply with Social Security regulations can result in penalties and reduced benefits. Ensure you understand and follow all the rules regarding earnings limits, tax implications, and reporting requirements.

Integrating Social Security with Other Secure Income Sources

A secure retirement plan integrates Social Security with other reliable income sources such as annuities, life insurance, and pensions. Here’s how you can balance these sources effectively:

Annuities and Social Security

Annuities can provide a steady stream of income in retirement, complementing your Social Security benefits. Fixed annuities offer guaranteed payments, providing financial security regardless of market conditions.

Life Insurance and Social Security

Life insurance can protect your family financially and provide an additional income source in retirement. Policies like whole life or universal life insurance can build cash value, which you can access if needed.

Balancing Pensions and Other Retirement Income

If you have a pension, it’s important to understand how it interacts with your Social Security benefits. Some pensions may reduce your Social Security benefits through the Windfall Elimination Provision (WEP) or the Government Pension Offset (GPO). Plan accordingly to avoid unexpected reductions.

Case Studies and Examples

Real-Life Scenarios
Consider John and Mary, a retired couple. John has a higher earning history, and Mary worked part-time. By delaying John’s benefits until age 70 and claiming spousal benefits for Mary at her FRA, they maximize their monthly income while ensuring long-term financial security.

Safe Approaches Taken by Successful Retirees

Many successful retirees focus on delaying benefits and integrating Social Security with other income sources. They avoid early claiming and ensure they understand the implications of their decisions on long-term financial stability.

Expert Tips and Advice

Insights from Financial Planners
Financial planners often recommend delaying Social Security benefits to increase monthly payments. They also suggest considering life expectancy, health status, and other retirement income sources when making this decision.

Ensuring Financial Security
To ensure financial security, diversify your income sources, stay informed about Social Security rules, and consider consulting a financial advisor. An advisor can help you create a comprehensive plan that maximizes your benefits and secures your retirement.

Conclusion
Maximizing your Social Security benefits is essential for a safe and secure retirement. By understanding how benefits are calculated, carefully timing your claims, and integrating Social Security with other income sources, you can ensure financial stability. Avoid common pitfalls, stay informed about regulations, and consider consulting a financial advisor to optimize your strategy.

Additional Resources
Social Security Administration – Official SSA website for comprehensive information and tools.
Retirement Calculators – SSA’s retirement estimator tool.

For personalized advice, consult with a financial expert. Check out our “Find a Financial Professional” section to get in touch. For a personal referral to an independent, licensed advisor, call us at 877-476-9723 or contact us here to schedule your first appointment.

Authored by Brent Meyer, founder and president of SafeMoney.com, with over 20 years of experience in retirement planning and annuities. Learn more about my extensive background and expertise here

The post Maximizing Social Security Benefits first appeared on SafeMoney.com.

In 2024, Social Security beneficiaries will get a 3.2% raise in their benefits. While it’s not as big as the 2023 COLA of 8.7%, it’s still quite a lot. This is good news for retirees and others receiving Social Security payments for a few reasons.

One, because it means their payments will be higher to keep up with the rising costs. Secondly, inflation is going up but not quite as high as it was in the past two years. That means that retirement dollars won’t have their purchasing power eroded as much (although inflation is increasing and it will go down a bit). Still, the prices of everyday goods and services are high as-is, especially for retirees on a fixed-income budget.

Let’s go through what the 2024 COLA for Social Security means, how they calculate this raise, and what you can do to make your money last longer. With statistics showing people spending as much as one-third of their lives in retirement, knowing how your Social Security benefits and other income sources work together can help you stretch your retirement dollars.

How Does the U.S. Government Calculate the Social Security Raise?

The agency that determines COLAs for Social Security is the Bureau of Labor Statistics. They are the “principal fact-finding agency for the federal government in the broad field of labor economics and statistics.”

They use something called the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to work out the raise for Social Security. This CPI-W checks how prices for things people buy in cities across the USA are changing. They look at eight major categories of spending for that. When the numbers show that things are getting more expensive, Social Security payments usually go up.

Oil, energy, food, housing, and medical care costs are important aspects of this calculation. They make the CPI-W go up or down.

What Does the 3.2% COLA in 2024 Mean for You?

We have seen high inflation over the early 2020s. With things becoming more expensive, a 3.2% raise on Social Security benefits is great news for those who need more money to cover the higher costs of living. It’s not as big a boost in 2023 and 2022, but it will provide retirees with a little bit of relief for keeping up with the jump-up in living costs.

Right now, the average monthly payment is just above $1,700. So, it might go up by around $54 every month or so next year when the 3.2% raise takes effect. But remember, your own payments might be different depending on what you paid into Social Security when you were working. That is based on your earnings record (how much you earn per year) and your work history.

How Much More Will Prices Go Up?

It’s pretty tough to predict what prices, like things you buy, will look like in a year. Even seasoned economists with years of experience in data-crunching can’t know for certain what inflation will be.

But we can probably believe that prices may keep going up in the next few years. Think of good and bad economic times as different seasons. No matter what happens, and again, no one can predict what will happen anyway, having a plan will help you stay financially high and dry in the rainy season.

Getting the Most Out of Your Social Security Benefits

Creating a well-thought-out financial plan begins with making the most of Social Security. With inflation continuing to have its way, it’s crucial to ensure that you get all that you can from your Social Security benefits in retirement. Here are a few things that you can keep in mind if you are close to retirement, or perhaps you have hit retirement age in your mid-60s and are still working.

You can start receiving Social Security paychecks as early as 62, but your payments will be less if you do that. The full retirement age is different for everyone, and it depends on their birth year, but it’s usually between 66 and 67. If you wait until that age to get Social Security, you will receive 100% of your benefit every month.

There are also advantages to waiting to start Social Security after full retirement age. For each year that you, your benefit goes up by 8%. The latest age that you can wait until is 70, so if you push pause on collecting your Social Security payments at 70, your benefit will have increased 32%.

The breakeven point of starting Social Security early vs. past full retirement age is quite a few years into retirement, so talk to your financial professional about what options might be good for your situation.

Making Sure You Have Enough Money, Even with the Big COLA for 2024

Even with this big raise, Social Security wasn’t made to be the only source of income when you retire. According to the Social Security Administration, benefits will replace roughly 40% of people’s pre-retirement income. The income gap has to be made up somehow.

It’s a good idea to have different sources of income, like pensions, 401(k)s, and IRAs. Depending on your financial situation, you might think about ways to get a steady income that goes along with Social Security.

Not everyone has a pension. The good news is you have alternatives. Annuities let you have your own pension-like income stream and design it as you would like for your situation.

There are simple annuities that turn your money into an irreversible, guaranteed lifetime income stream. Other annuity types are more customizable. They let you add on benefits, such as increased payouts for certain long-term care. Some annuities have an add-on benefit called an income rider, which lets you have some access to your money and still receive lifetime payments. These add-on benefits usually come with an annual fee.

Other Options for Lasting Retirement Financial Security

Diversifying your money sources helps you ensure that you have enough income when you are retired, even when prices are rising. If you are still worried that you might not have enough, there are other things that you can do.

You can work part-time when you are retired or live in a smaller home to cut down on expenses. Talk to a financial professional about ways to make your retirement money go further and get the most out of what you already have.

If you need to save more and work longer, that can give you more time to put money into retirement accounts and make your retirement money grow.

The Bottom Line on the 2024 Social Security COLA Update

The Social Security COLA for 2024 helps retired folks keep up with rising costs. But don’t forget that Social Security isn’t meant to be your only money source when you retire. It’s a good idea to generate income from different places and make wise choices about when to claim your Social Security benefits.

No matter what, it’s smart to plan ahead for your money, especially when it comes to something as important as your retirement.

Do you want help making confident, well-informed choices about Social Security or planning your retirement money? Or maybe you would like another opinion about your plan. When you are ready for personal guidance, there are many experienced and independent retirement experts at SafeMoney.com who can help.

You can start by looking at our “Find a Financial Professional” section to talk to someone. You can ask for a first meeting to talk about your situation and see if you want to work together. If you need help finding someone, please call us at 877.476.9723.

The post Social Security Benefits COLA 2024: What to Know first appeared on SafeMoney.com.

To be clear, those are just numbers. Paul Simon knew 50 ways to leave your lover. Most sources cite somewhere between 567 ways, nine ways (for a single person), and 81 ways (for a couple).

However many ways there really are, and even the Social Security Administration doesn’t seem to offer a straightforward answer, the important thing is that you claim in the most productive way for you and your spouse if you are married.

Here are a few things to keep in mind as you explore different options for when and how you will collect Social Security. These factors can help you make the most of your benefits, whether claiming early or delaying past your age of full benefit eligibility to let your benefit grow more.

Full Retirement Age

For many people, waiting to claim until you reach full retirement age is often a very practical strategy. Full retirement age (FRA) varies depending on when you were born. For those born from 1943 to 1955, it is 66. For those born from 1955 to 1960, it increases gradually to age 67. For those born after 1960, FRA is 67.

FRA matters because when you claim affects the percentage of your “normal” benefit you and your spouse can expect to receive. If you claim at FRA, you will receive 100 percent of your regular benefits. Each year you wait to claim after FRA until age 70 increases your benefit by 8 percent.

Thus, if your full retirement age is 67 and you claim at 68, your benefit will be 108 percent of your standard benefit. In other words, you can increase your monthly benefit by nearly one-third just by waiting four years to claim.

Calculate Your Breakeven Point

On the other hand, you need to calculate when you will break even on that delay and if you are likely to do so. In other words, by waiting till 70, you have foregone at least 3 to 4 years of your full standard benefit. If your benefit would have been $1,500 per month and you have given up at least 48 months of that benefit, then you will need to earn $72,000 from the enhanced benefit to break even on your decision.

By waiting till 70, your $1,500 benefit will increase by nearly $500. To make up the $72,000 difference, you will have to collect 144 (12 years) at the higher rate. Of course, if your spouse is also collecting on your enhanced benefit, that period will be shorter. Various sources such as AARP say that your breakeven point is about 78 years and 8 months (claiming 62).

In considering your own timing, think about your health (are you likely to live much beyond 70), your immediate need for the cash flow, how much your spouse’s early benefit will add to your monthly income, and similar issues. Once you have considered all of these issues, the math will guide you to a decision.

Early Retirement Age

Leaving aside issues of disability, divorce, and possible dependent children issues, generally, the earliest you can claim Social Security is at age 62. Doing so will, however, permanently reduce your benefits by about 30 percent.

Similarly, if your spouse claims early, whether on your benefits or theirs, the benefits will always be lower. You may compare your immediate need for the month with the increased sum from waiting to decide what you should do. Of course, an experienced financial professional can help you work through these issues.

Another issue impacting the decision to claim early is whether you will continue to work after claiming. Those who are under FRA and still work are subject to an income limitation. This limitation updates every year, and the best source for the current number is the Social Security Administration’s website. On the SSA website, you can see what your limit will be, given your age and the month of your birth.

This earnings limit matters because if you exceed the limit in wages, self-employment income, bonuses, commissions, and vacation pay, you will lose $1 in benefits for up to every $3 over the limit you earned.

Waiting Until 70

As we mentioned previously, you gain 8 percent per year on your regular retirement benefit by waiting to claim. Thus, you can receive a benefit that is nearly one-third larger than your “normal” benefit simply by waiting to claim.

Similar rules apply to your spouse’s account. Remember, though, you will be forgoing those months of benefits entirely. Be sure to do your breakeven calculation before deciding what to do.

Of course, there are other factors to consider as well. You might use these questions to guide your decision-making process:

• Do you expect to inherit money in the future, which could be another income source besides Social Security?
• If you did collect your benefits early, would you invest any excess money above your monthly expenses?
• How could the growth of your invested money in that situation affect your timing with Social Security?

Your financial professional can help you think through these questions as well.

Will Your Social Security Benefits Be Taxable?

No matter what your income source, if your provisional income exceeds a set amount for a single person or a married couple, you will owe federal income taxes on some portion of your benefits. In addition, some states will also subject your benefits to income taxes.

Here is how you calculate provisional income. Add up the following to come up with your provisional income number:

• Adjusted gross income, including wages, investment income, rental income, pension and annuity income, and other income sources besides Social Security
• 50 percent of your Social Security benefits
• Tax-exempt interest from municipal bonds

Once you are above those income levels, somewhere between 50 and 85 percent of your benefits will be subject to federal income tax. Note that this doesn’t mean you will lose 50 to 85 percent of your benefits.

It means that a percentage of your benefits will count as taxable income and be taxed at your marginal tax rate. If you are in a relatively high tax bracket, this rule can take a big bite out of your benefits.

Spousal Benefits

Spousal benefits can vary greatly depending on whether your spouse has their own earnings history or has never worked. If your spouse has never worked or hasn’t worked enough to gather the minimum number of qualifying quarters (at least 10 years of work or 40 Social Security credits), they will be entitled to 50 percent of your base benefit.

That entitlement is subject to the same early claiming impact as other Social Security claims as well. Be sure to examine your taxes and your ongoing work to find a breakeven point.

As a starting point, your spouse is entitled to a benefit equal to 50 percent of your primary insurance amount. Just as with your own claim, however, claiming before FRA will permanently reduce the percentage of your benefit that your spouse will receive on claiming.

Depending on timing and other matters, your spouse’s benefits could be permanently reduced. Of course, your situation will decide whether claiming now is worth the permanent slash in benefits.

Other Factors Supporting Your Decision

We talked earlier about the possibility of inheriting money or investing excess payments from Social Security. When deciding when and how you or you and your spouse should claim Social Security benefits, there are several other factors for you to consider.

Health Issues

Consider whether you or your spouse are likely to survive long enough to reach the breakeven point on waiting. Also consider whether getting benefits now might help pay ongoing medical expenses.

Need for the Money

Examine your current income and assets. Do you have enough to be comfortable until you reach FRA? Is your retirement planning falling sufficiently short that you need the money now, even if in a reduced amount? You should consider these issues in your claiming timing.

Plan to Continue Working?

If you are still working, the potential loss of benefits and taxation of benefits may make it simply unprofitable to claim early. You can lose benefits by making too much income before FRA, and the taxes on your benefits if you’re still working can also take a heavy toll.

Work with a Financial Professional

If you are nearing retirement and thinking about claiming Social Security for yourself, your spouse, or both of you, you should consider working with a financial professional to discuss your options. This experienced individual can help evaluate your retirement assets and potential income and then help you determine exactly how Social Security should fit into the mix. 

Are you looking for a financial professional to assist you? On the other hand, you may want a second opinion of your current retirement strategy. For convenience’s sake, many independent financial professionals are available at SafeMoney.com to help you.

Use our “Find a Financial Professional” section to connect with someone directly. You can request an initial appointment to discuss your goals, concerns, and situation, and to explore a potential working relationship. Should you want a personal referral, please call us at 877.476.9723.

The post 567 Ways to Claim Social Security first appeared on SafeMoney.com.

The COLA for 2023 will be a historic 8.7%, according to the Social Security Administration. This will be the largest COLA since the 11.2% boost in benefits that took place in 1982. To put things in perspective, last year Social Security had a 5.9% increase in benefit payments.

Keep reading to learn more about how the COLA is calculated and what it means for you, especially in this period of inflation.

How Is the Social Security COLA Calculated?

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is used to calculate the COLA for Social Security benefits. The CPI-W measures changes in prices for urban consumers across the United States using eight major categories of spending along with subcategories. When there is a significant measurable increase in the CPI-W from one year to the next, there is typically an increase for Social Security benefits.

According to the Bureau of Labor Statistics, oil and energy prices are one of the most significant drivers of the CPI-W, as well as consumer staples such as food and housing. Medical care costs are also a significant factor in the CPI-W calculation.

What Does the 8.7% COLA for 2023 Mean for You?

An 8.7% COLA increase is great news for retirees who need their income to keep up with the rising cost of living. With inflation on the rise, the cost of living adjustment for 2023 will help retirees maintain their standard of living.

The average monthly benefit amount is currently just below $1,600. So, it may see an increase of about $135 per month next year if this estimated COLA goes into effect. Of course, your actual benefit amount may be different depending on your personal situation. The size of your benefit check depends on how much you paid into Social Security during your working years.

How Much More Is Inflation Expected to Rise?

To be hard, it’s hard for even economists to predict what inflation, let alone interest rates, will look like just 12 months from now.

Given that caveat, inflation is expected to continue to rise in the coming years, which means that we might see future COLAs that would be higher than they have been in recent years. The Social Security Administration is projecting that the COLA for 2024 could see a 0.2% increase and that the COLAs for 2025 and 2026 could continue that trend.

With the cost of living on the rise, it’s crucial to make sure that you are getting the most out of your Social Security benefits. If you are nearing retirement, there are a few things you can do to maximize your benefits and make sure you are getting the most out of the program.

You can start receiving Social Security benefits as early as age 62. However, your benefits will be permanently reduced if you start receiving them before your full retirement age. Full retirement age is determined by your date of birth, and it ranges from 66 to 67. If you wait until after your full retirement age to start receiving benefits, you will receive 100% of your benefit payment each month (as opposed to a reduced benefit with you claiming Social Security before full retirement age).  

Planning for Income Security Even with a High Social Security COLA

While this would be a significant increase in benefits, it’s important to remember that Social Security was never intended to be a retiree’s sole source of income. Ideally, retirees should have a mix of income sources, including pensions, 401(k)s, IRAs, and more. Depending on your financial picture and how much predictable monthly income your assets will generate, you may consider financial options that can pay you guaranteed income and that complement the ongoing, reliable payments of Social Security.

Diversifying your retirement income sources is another key way to make sure you are getting the most out of your golden years. This will help ensure that you have enough money to cover your expenses in retirement, even in hard times such as when inflation is on the upswing.

If you are concerned about whether or not your benefits will be enough to cover your costs in retirement, there are a few things you can do to supplement your income. One option is to delay claiming Social Security benefits until you reach full retirement age. This will give you a bigger monthly benefit check.

You can also consider working during retirement (maybe part-time employment) or downsizing to a smaller home to reduce your living expenses. Also, speak with your financial professional about ways to stretch your retirement dollars further and maximize your income with what you might already have. If you need to save more and perhaps work longer, as covered above, that can give you more time to contribute to retirement accounts and let those retirement assets grow.

Some Final Thoughts About the Social Security Benefits 2023 COLA

Social Security COLAs help retirees maintain their lifestyle with a rising cost of living. But it’s also important to remember that Social Security was never meant to be a retiree’s sole source of income. Diversifying your retirement income sources and making smart decisions about when to claim Social Security benefits can help ensure that you have enough money for all of your retirement.

No matter what, it’s important to have a retirement plan that fits your needs and positions you to meet your long-term goals. Planning ahead is important when it comes to money, especially when it comes to something as important as your retirement income. 

Are you looking for help with making well-informed decisions about Social Security or planning for your retirement income? On the other hand, perhaps you want a second opinion of your current plan. For convenience’s sake, many experienced and independent financial professionals are available at SafeMoney.com to assist you.

You can get started by visiting our “Find a Financial Professional” section to connect with someone directly. You can request an initial appointment to discuss your situation and explore a potential working relationship. Should you need a personal referral, please call us at 877.476.9723.

The post Social Security Benefits COLA 2023: What You Should Know first appeared on SafeMoney.com.

It may be surprising to see the number of ways that you can increase your benefits, regardless of whether you take them early, on time, or late. There are several strategies that can provide you with a higher benefit, both now and later, if you play your cards right.

Read on to find out how you can get the most out of your benefits once you are ready to do something with them.

Wait Before Taking Benefits

The most straightforward way to get a higher Social Security benefit is to wait for a few years before you start collecting benefits.

If you are 62 years old, then you can start collecting benefits early. However, you will forfeit roughly a quarter of your benefit for the rest of your life. If you wait until you reach full retirement age to begin collecting your benefit, then you will receive 100% of the benefit that you have accrued from your working years.

Read More: How Does Full Retirement Age Affect Social Security?

What about waiting past your full retirement age? Each year that you delay taking your benefit past full retirement age lets it accrue roughly another 8% per year.

Delaying Benefits Until Age 70

Should you wait until you reach age 70, the maximum age until which you can delay taking benefits, there is a ‘bonus’ of sorts. Your benefit will increase by roughly 32%, and you will receive these benefit payments for the rest of your life.

What if you are planning to work until you reach your full Social Security retirement age or even age 70? Then it can pay off to wait to start collecting benefits until after you stop working.

Your benefit will accrue more. What’s more, you can grow your overall benefit amount by adding these highest-earning years of your career to your earnings record. More on that a little bit later.

Spousal Benefits

If you need to have some income start coming in immediately, then you can suspend your benefit until you reach full retirement age or later. Then for the time being, you can start collecting a spousal benefit.

You will get half of your spouse’s full benefit with this strategy. However, you must have been married for at least a year before you apply. If you are divorced, you must have been married for at least 10 years. If you have remarried, then you are ineligible for this strategy.

In most cases, whichever of you that earned more must start collecting benefits before the spouse can begin collecting benefits. At that time, then the lower-earning spouse can claim spousal benefits.

Prepare for the Tax Man

While once Social Security benefits were tax-free, this is unfortunately no longer the case. Now there are situations in which your benefits may be taxable.

Two separate income thresholds apply for single and married filers who file jointly. The thresholds are broken down as follows:

Single, Head of Household, and Married Filing Separately

If your modified taxable income is at least $25,000 to $34,000 per year, then up to 50% of your Social Security income may be taxable. If your modified taxable income is greater than the high end of this threshold ($34,000), then 85% of your Social Security will become taxable.

Your modified taxable income in this case refers to your combined gross income, half of your Social Security benefits, and any tax-exempt interest that you receive. An example of a tax-exempt source is municipal bonds.

Married Filing Jointly

If your modified taxable income is between $32,000 and $44,000, then up to 50% of your Social Security income may be taxable. 85% of your Social Security is taxable if your modified taxable income is greater than $44,000.

Just as with other filers, the same definition of modified taxable income applies to joint filers as well. Your financial professional can help you explore options that assist in reducing your modified taxable income and overall tax drag on retirement income.

Balancing Income Needs with Tax Strategies

What if you fall into one of these brackets and still need more income?

Then you may want to consider sources of income that can reduce your overall taxable income. For example, Roth IRA distributions or cash value life insurance policy loans may be some options to explore.

This can help you to lower your taxable income below the thresholds listed above.

Suspend Social Security Benefits

If you can go without your Social Security benefit for now, then consider suspending your benefit until you reach a later age. That way, you can claim a higher benefit later.

There is one major drawback to this strategy. Your spouse and family can’t claim any benefits based upon your payout until you start collecting benefits again. You will need to carefully run some numbers to see how much suspending your benefits will cost your family versus what you can collect at a later age.

Your financial advisor can help you to make these calculations. It’s prudent to let them help you with this. These decisions could mean as much as hundreds of thousands of dollars in lifetime income over the long haul.

Read More: Strategic Tax Planning Moves for Retirement

Work for As Long as You Can

Your Social Security benefit is based upon the highest-earning 35 years of your work history. If you are thinking about retirement but want to increase your overall benefit, you might consider working for a few more years.

You are probably earning more now than you ever did before. You can replace lower-earning quarters with current quarters at your current salary or income level, thus raising your benefit.

If you are able to work until you are 70 years old, then you can collect the maximum possible benefit then and meanwhile have it grow even more. All of the quarters of your coverage were from your highest-earning years.

Maximizing Your Benefits and Income for Retirement

These are the primary ways that you can increase your Social Security benefits. If your benefits aren’t enough to pay for your expenses each month during retirement, then consider other sources of guaranteed income to cover the gap.

Annuities might be an option to look at. After all, they are the only thing besides Social Security that can pay you a guaranteed income for life.

Consult your financial advisor for more information on Social Security claiming strategies as well as annuities and how they can benefit you. With their help, you can increase your Social Security benefits, maximize your retirement income, and enjoy a comfortable lifestyle with more financial confidence.

What if you are looking for a financial professional to guide you through all of this? No sweat, many independent financial professionals are available here at SafeMoney.com.

Use our “Find a Financial Professional” section to get started and connect with someone directly. You can request an initial appointment or quick call to discuss your goals, situation, and explore a working relationship. Should you need a personal referral, please call us at 877.476.9723.

The post Social Security Claiming Strategies first appeared on SafeMoney.com.

In 2021, Social Security had a 1.3% COLA to benefits, which was slightly smaller than the 1.6% increase of 2020.

But in 2022, Social Security recipients will get a boost in benefit payments that is over four times the average COLA from these past two years. This coming COLA of 5.9% is also the largest increase in almost 40 years.

This has been done in an effort to keep up with the runaway inflation that has gripped America. The consumer price index shows that the price of retail goods has risen by an astounding 5.4% in 2021, at the time of this writing.

The pandemic has also disrupted much of the United States’ economic infrastructure and caused job losses. Retirees who depended on part-time work and other income sources were hit, so the COLA adjustment will help offset the decline in their incomes.

How Are Social Security COLAs Calculated?

The cost of living increase is calculated each year based on the Consumer Price Index for Urban Wage Earners and Clerical Workers. This is also known as “CPI-W” for short.

The CPI-W is calculated each month by the Bureau of Labor Statistics, using eight major categories of spending and numerous subcategories. Each category and subcategory are assigned an appropriate weighting. A COLA is implemented in any year where the index is measurably higher than it was the year before.

One major driver of the spike in the COLA for 2022 is the price of oil and other forms of energy. Oil and gas prices have hit multi-year highs, according to the Bureau of Labor Statistics.

The prices of food, medical care, and shelter have risen substantially as well. Costs of beef, eggs, and poultry has increased by double-digit percentages. The projected increase in the cost of Medicare Part B premiums, by $10 per month in 2022, is yet another example.  

How Much More in Benefits Will Recipients Get?

The COLA increase means that the average Social Security recipient will get a boost of $92 per month in their benefit, taking it to a monthly $1,657. That is an estimate by the Social Security Administration for benefit recipients overall.

Social Security by Itself Isn’t Enough

Social Security is a dependable source of income, but most often it’s not enough by itself to cover all of your living expenses. You will need other sources of reliable income in order to keep up your lifestyle in retirement.

Retirees who are looking for ways to bolster their income may want to consider annuities as one possible alternative. Annuities can function as a type of “private pension,” as they can pay a stream of income that someone can’t outlive. In fact, an annuity is the only thing on the planet besides Social Security that can truly pay you this guaranteed income for life.

Annuities provide many other benefits such as tax-deferred growth, exemption from the probate process, and protection from creditors in quite a few cases.

What About Inflation?

No one can predict what might happen with inflation for the foreseeable future. But what could you do to preserve your money’s buying power if it does continue?

No strategy is foolproof. Everything has strengths and limits. You may want to visit with an experienced, independent financial professional to discuss different options as well as the pros and cons of each one.

If you believe that you can have more peace of mind coming from the contractual guarantees of annuities, here are a few options in this area to consider. You might want to coordinate these guaranteed options with other strategies in your overall plan.

Annuity Strategies to Guard Against Inflation

Some fixed index annuities have guaranteed income riders (usually for an additional fee) that give you some flexibility with your money. You can “ladder” several of these annuities over time so that you aren’t committed to just one set payment. Other fixed-type annuities can also help here, from immediate annuities to deferred income annuities.

If you prefer not to give up some access to your money or to turn on an income rider, you might also be able to leverage the growth of a fixed index annuity to your advantage. While the growth isn’t guaranteed, your money can earn interest based on changes in the annuity’s underlying index benchmark.

Historically, these interest earnings have generally been above inflation. Over time, you can take free withdrawals from your indexed annuity contract, as needed. Most contracts give you free withdrawals of up to 10% of your contract’s value per year.

This can be a nice guard against inflation while giving you some flexibility and nice growth potential for your money.

Some Final Thoughts

Retirees will undoubtedly enjoy the large COLA increase in decades once it hits their bank accounts. But even this substantial adjustment will not be enough to counter the effects of inflation that have been active for some time now.

Retirees looking to fill the income gap beyond Social Security benefits can look to annuities as a viable alternative to the stock market or the low interest rates being paid from CDs and bonds.

Consult your financial advisor for more information on Social Security benefits and how different strategies for claiming them can affect you. If you are looking for a financial professional to help you with this important decision – or you want another opinion of your existing retirement strategy – then no sweat.

Many independent financial professionals are available at SafeMoney.com to assist you. Use our “Find a Financial Professional” section to get started and connect with someone directly. You can request an initial appointment to discuss your financial situation and explore a potential working relationship. Should you need a personal referral, call us at 877.476.9723.

The post Social Security Will Get a Boost of 5.9% for 2022 first appeared on SafeMoney.com.

This increase is lower than the increase of 1.6% for 2020 by 0.3%. It’s also 0.1% lower than the average COLA of 1.4% that recipients have received over the last decade.

The average Social Security recipient will see a monthly bump-up of about $20 overall. In other words, that will be an increase from an average benefit of $1,523 in 2020 to $1,543 in 2021.

How Are Social Security Benefits COLAs Calculated?

The COLA adjustment that is applied each year is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This consumer price index is calculated by the Bureau of Labor Statistics (BLS).

If the CPI-W increases more than 0.1% year-over-year between the third quarter of the previous year and the third quarter of the current year, Social Security will raise benefits by the same amount.

The precise calculation is fairly complex. It may result in a new benefit amount that differs slightly from the amount that is derived by multiplying the new COLA by the current benefit amount.

2021 Social Security Withholding Rates and Limits

In 2021, the Social Security tax of 6.2% will be levied on all earned income up to $142,800.

This marks an increase of $5,100, or 3.7% from the limit of $137,700 in 2020. Any amount that is earned above this limit is exempt from this tax.

The tax rate of 6.2% will remain unchanged, just as it has for the past several years. Those who are self-employed are still required to pay the full amount of 12.4% on all of their net earnings up to the limit.

But just as the maximum amount of money that is subject to the Social Security tax has increased, so will the amount of the maximum possible Social Security benefit, from $3,011 in 2020 to $3,148 in 2021.

2021 Changes for Taking Benefits While Still Working

What if you are collecting Social Security benefits while you are still working? A percentage of your benefits may be withheld until you reach your full retirement age if your earned income exceeds a certain amount.

This amount has increased slightly for 2021. Before reaching full retirement age, you will be able to earn up to $18,960 in 2021.

After that, $1 will be deducted from your payment for every $2 that exceeds the limit. The 2021 annual limit represents an increase of $720 over the 2020 limit of $18,240.

If you reach full retirement age in 2021, you will be able to earn $50,520. That is up $1,920 from the 2020 limit of $48,600.

For every $3 you earn over the 2020 limit, your Social Security benefits will be reduced by $1. But that will only apply to money earned in the months before hitting full retirement age.

Once you reach full retirement age, no benefits will be withheld if you continue to work, regardless of your level of earnings.

When Will You Know Your Exact Benefits for 2021?

The Social Security Administration will notify you of the exact amount of your new benefit sometime in December. However, they can’t give this amount until the amount of the new Medicare premiums for 2021 is made public.

Social Security retirement benefits are one of the safest sources of income on earth. They are backed by the full faith and credit of the U.S. Government.

However, according to the Social Security Administration, they are only designed to replace about 40% of the recipient’s income that they received during their working years.

Therefore, those who depend solely on this source of income usually end up finding themselves with too much month at the end of their money.

When Should You Collect Social Security?

If you are trying to determine when the best time would be for you to begin collecting Social Security benefits, there are several factors that must be taken into account.

One of the most important questions is when you would like to stop working.

If you plan on working until you are at least 70 years old, then you might think about delaying your Social Security benefit until then. That way you can receive the maximum possible benefit.

What Are the Benefits of a Delayed Claiming Strategy?

Waiting until you are 70 to collect your benefits means that you will receive a benefit that is 32% higher than the benefit that you would have received if you had started collecting it at your full retirement age.

Each year you defer taking your benefit past full retirement age, your benefit accrues roughly another 8%.

This decision becomes even more complicated if you are married. Both you and your spouse must figure out a joint issue that can have far-reaching financial ramifications.

What About Claiming Social Security Early?

But by the same token, consider starting benefits before your full retirement age if you are in poor health or have a family history of limited longevity.

It’s better to collect a reduced benefit now than to end up getting little to nothing in the end by waiting for too long. This may also be a good idea if you are confident that you can generate a higher return by investing the reduced amount now and letting it grow.

How Does the Timing of Your Decision Affect Your Benefits?

The Center for Retirement Research shows that about half of Americans begin collecting Social Security at age 62. However, this strategy results in a benefit that is 30% less than what they would have received had they waited until full retirement age.

If you are unable to determine when the best time would be for you to begin collecting your benefits, don’t hesitate to enlist the help of a qualified financial professional or planner.

They will probably have software programs that can calculate the best age at which to begin collecting benefits based on a number of variables.

Those include your life expectancy, how long you intend to keep working, the projected COLAs of your monthly benefit going forward, and so on.

Social Security, a Crucial Retirement Decision

Just don’t leave this decision to chance. It could make a difference of hundreds of thousands of dollars in your pocket over the course of your retirement if you make a misstep here.

You also need to take into account your retirement savings and the rate of return that it could generate for you over time.

Coordinate Your Retirement Portfolio with Social Security

Be sure that your portfolio is well-balanced between equities and fixed-income instruments so that you are taking the right types and the right amounts of risk. And don’t forget to take taxes into consideration.

If your income exceeds a certain level, then a portion of your Social Security benefits will become taxable. Just don’t let this issue dictate your whole retirement plan. Your tax “tail” shouldn’t wag your entire financial “dog.”

The amount of money that you withdraw from your retirement savings is another important factor to consider. Most financial planners today will tell you not to take out more than 3-4% of your savings per year.

Cover Retirement Income Gaps

Drawing down your assets too quickly can be a critical mistake. Make sure that your assets will last as long as you do. One of the ways you can do this is by using an annuity that pays you a stream of guaranteed lifetime income.

Consult your financial advisor for more information on Social Security and retirement planning and how an annuity could benefit you.

What if you are looking for a financial professional to guide you? Many are available at SafeMoney.com to provide the personal assistance and answers which you might be wanting.

Use our “Find a Financial Professional” section to connect with someone directly. You can look up their credentials and request a personal appointment to discuss your situation. Should you need a personal referral, please call us at 877.476.9723.

The post Social Security Will Get a COLA Boost of 1.3% for 2021 first appeared on SafeMoney.com.

In time, the outflowing payments to Social Security beneficiaries will start exceeding what Social Security has in reserves. The Social Security Administration will then have a decision to make.

It will have to rely more on the inflows from payroll taxes (and possibly other funding measures) in order to keep up its promised benefits payments to future generations of retirees.

Before the pandemic crisis, Social Security was looking at its reserves being depleted by roughly 2035. But now, over 20 million people have lost their jobs as a result of the spread of the coronavirus.

That is 10% of the U.S. workforce. Payroll taxes that would be pouring into the U.S. Treasury from everyone’s paychecks have lessened considerably. As a result, Social Security has been dipping further into its reserve funds in order to keep up its promises to retirees and other benefits recipients.

What Has Changed with Social Security?

Teresa Ghilarducci is a leading retirement researcher and authority. She thinks the timetable for Social Security depleting its reserves has moved up a little.

Based on her estimates, the date may have moved up 2 years. That means that we have 13 years left until the Social Security system is depleted.

The financial meltdown of 2008 caused over 5% of all retirees aged 62 and up to start claiming benefits early. Why? Because they had lost their jobs and had no other meaningful source of income.

History could repeat itself in the near future. In turn, that would be responsible for the reduction of time until Social Security runs out of reserves.

However, this isn’t a reason to panic. Beneficiaries will continue receiving their Social Security benefits payments, just as Social Security has done for decades. Even if the reserves were depleted, it would still maintain payments to beneficiaries. However, the amount of monthly income they would receive might be reduced.

Take Control of Your Retirement

Of course, it’s also good to be prudent. If you aren’t working with an experienced financial professional who understands retirement, there are upsides to seeking someone out right now.

These are unprecedented times, and we are in uncharted waters. The guidance of someone who has been through some market cycles and has assisted many other people can help you have more peace of mind.

Also, keep in mind that you can’t take back many retirement decisions once you have made them. What we do or don’t do in the present might have an impact on the future for years to come.

With a financial advisor or agent’s help, you can discover how to become more retirement-ready: having a rock-solid plan for how you will be financially secure and confident, even in unpredictable times.

You wouldn’t have to depend as much on Social Security and other things outside of your control for your retirement income.

Your Money Needs to Work for You

It’s taken many years of hard work to reach this point. Now, or when you are ready, you can start exploring the ways that your money can go to work for you.

This starts with answering these questions. How can you deploy your money so that:

• You know whether you need to protect your money now so you can have a comfortable retirement?
• You have enough income each month to enjoy your retirement lifestyle?
• You have a plan that once you are retired, you have the choice to stay retired for good?
• You can live your retirement life on your own terms?

Your financial professional can help you cover these important questions and make the most of your money for your golden years. Don’t be afraid – take action and be confident!

Good days are ahead. We just have to take the necessary steps to reach them now.

Bolstering Your Retirement Income

Perhaps the first step that you can take is to consider putting some of your money into an annuity. Annuities are the only instrument in the marketplace today that can pay you a guaranteed stream of income that will last for as long as you live.

You will continue receiving income even if you deplete the entire value of your annuity contract before you die.

A Quick Rundown on Fixed Annuities

There are three primary types of deferred annuities: fixed, fixed index, and variable. Fixed annuities pay a guaranteed rate of interest for a set period of time, such as 5 to 7 years.

Then the interest rate resets based on the current interest rate environment at that time. Fixed annuities typically pay higher interest rates than other types of guaranteed instruments such as Treasury securities, savings bonds, and CDs.

What Do Fixed Index Annuities Do?

Fixed index annuities also guarantee the protection of your principal. However, they tend to earn interest in a different way than fixed annuities do.

The interest that they pay is based on the performance of an underlying financial benchmark that they are tied to, such as the Standard & Poor’s 500 Price Index.

When the benchmark rises, then the insurance carrier will credit the contract with a proportionate amount of interest. If the benchmark falls in value, then the annuity owner won’t lose anything.

Their contract will simply stay at its current level. Indexed annuities have crediting periods that can be as short as monthly or as long as biannually.

Once interest has been credited to the contract for a given crediting period, the annuity owner can’t lose that money no matter what the markets do next.

It’s not what you earn that really matters; it’s what you keep that counts. And fixed index annuities are ideal instruments in this respect.

What Does a Variable Annuity Involve?

Variable annuities are the primary type of annuity where it’s possible for you to lose money. This is because the money that goes into a variable contract is invested in mutual fund subaccounts that invest directly in the stock, bond, and real estate markets.

When these markets decline, the contract owner can lose money if the subaccount values fall below the initial purchase amount. But variable annuities can also provide the highest level of growth during bull markets, because 100% of the growth is credited to the subaccounts.

In contrast, fixed index annuities will only receive a portion of the index growth because of their relative safety.

No matter what, all of these types of annuities can provide you a guaranteed income, month after month, like clockwork. In that regard, they are a powerful antidote to the retirement income puzzle.

Create Your Own ‘Personal Pension’ for Income

Annuities are unique vehicles that offer many benefits to those looking for a new alternative for their money. Their unique assurances of guaranteed income are an excellent supplement to Social Security.

Ask your financial advisor for more information on annuities and how they can help bolster your retirement income alongside your Social Security benefits. What if you don’t have a financial professional to guide you? Or if you are looking for a second opinion of your financial situation?

For your convenience, answers are just a click away at SafeMoney.com. Use our “Find a Financial Professional” section to connect with someone directly. You can request an initial appointment to discuss your needs and concerns. Should you need a personal referral, call us at 877.476.9723.

The post Social Security is Dipping Into Its Reserves Faster Due to Coronavirus first appeared on SafeMoney.com.

But full retirement age isn’t the same for everyone. For those born before 1943, this is age 65. For those born after that year, full retirement age can range from 66 to 67 years old.

This matters for eligible recipients because choosing when they begin receiving benefits is one of the most important retirement decisions that they might make. Making the right choice can make a difference of tens, or even hundreds of thousands of dollars, in the lifetime benefits they are paid.

You can start taking Social Security benefits once you turn 62, but your benefit will be permanently reduced by 30% or more. You will have to wait until you reach your full retirement age to get your full benefit.

And if you delay collecting benefits until after your full retirement age? Then you can increase the amount you receive by about 8% per year until age 70. Waiting to take your benefits at 70 will increase your monthly benefit about one-third more than your regular full benefit.

When Does Your Full Retirement Age Kick In?

Knowing when you will reach full retirement age is a critical factor in your retirement plan. It can help you to decide when you would like to begin collecting benefits.

The Social Security Administration counts your birthday as the day before your actual birthday for the purpose of paying benefits. The full retirement ages for those born in 1943 and after is broken down as follows:

The Month of Your Birthdate Matters for Full Retirement Age

The month of your birthdate is important to the Social Security Administration. However, it doesn’t necessarily reflect the dates when you reach your various milestones.

Sometimes it’s the month after the month of your birthday that counts. Why? Because that is the first month that you are that age for the entire month.

For example, if your birthdate were on January 20, 1954 then you would have turned 62 on January 20, 2016. But you couldn’t start collecting benefits until February. However, when you reach full retirement age in 2020, you can get your first full benefit check in January.

Another exception is the maximum benefit age of 70. Once you reach that age, you can begin collecting your maximum benefit in January.

Special Rule for Those Born on the First Day of a Month

Another twist comes if your birthday falls on the first day of the month. The Social Security Administration will then consider your birth month to be the previous month for the purpose of paying either your full benefit or maximum benefit.

For example, say your birthday was on April 1, 1954. Then you would have reached age 62 on April 1, 2016 and you would have been eligible to start collecting benefits at that time.

But for full retirement age of 66 you can begin collecting your full regular benefit in March of 2020. As for the maximum retirement age of 70, you can start your maximum benefit in March of 2024.

Why Do We Have Full Retirement Age for Social Security?

The full retirement age was modified by legislative reforms in 1983.

One of the key changes was to the full retirement benefit credit. It was scheduled to gradually rise from 3 percent for those retiring before 1990 to 8 percent for those retiring after 2008.

Other legislation raised the age of eligibility for unreduced retirement benefits in two stages to 67 by the year 2027. Workers born in 1938 were the first folks affected by this gradual increase. Benefits were still available at age 62, but they were reduced.

Full Retirement Age, a Benchmark for Retirement Milestones

Today, the full retirement age acts as a marker for two key milestones.

It marks the date on which full retirement benefits are paid out. Not only that, it also serves as the marker date for the earnings test for those who begin taking benefits early while they are still working.

There is also a provision that allows widows and widowers to begin collecting benefits at age 60. Disabled widowers may be able to collect benefits even earlier.

Of course, knowing all of this information by itself still won’t enable you to decide when to begin collecting benefits.

Working Through Your Social Security Claiming Decision

If you plan on working until you are at least 70, then you may be wise to delay collecting benefits until then. But if you have health issues or your family has a history of diminished longevity, then you may come out ahead by electing to receive benefits at age 62.

Look at your estimate of Social Security benefits. Then run some numbers to compare what you will receive if you elect for Social Security benefits at a given age.

It would also be wise to enlist the help of a Social Security consultant — or an experienced, knowledgeable financial professional — who thoroughly understands the rules of Social Security.

Social Security is One Piece of the Retirement Puzzle

Retirement planning is usually a complex process that requires analyses of both your cash flow and balance sheet, as well as portfolio construction. And, of course, you will need to factor your Social Security benefits alongside any pension payouts or other income streams that you will receive.

For these reasons, hiring a financial professional can be very helpful. One way that someone can help you is plugging all of your numbers into a sophisticated computer program that can give you a high-level analysis of how your assets and income might perform during retirement.

Knowing when you will reach your full retirement age is only the first step in retirement planning, but it’s a vital one. You will need to find out when this will be in order to be able to plan your retirement effectively.

Need Help Solving for Your Retirement What-Ifs?

Your financial professional or Social Security advisor can help you to determine when this is, as well as help you to decide when to start collecting benefits. But now is the time to begin planning for retirement.

The longer you wait, the fewer retirement options you will have. If you are ready for personal guidance, help is a click away at SafeMoney.com.

Use our “Find a Financial Professional” section to connect with someone directly and request a personal appointment. If you need a personal referral, call us at 877.476.9723.

The post How Full Retirement Age Affects Social Security first appeared on SafeMoney.com.

While this raise is less than the 2.8% cost-of-living-adjustment for 2019, it’s still higher than the 1.4% average COLA that participants have received over the past decade. The Senior Citizens League was also spot on with its projection for Social Security next year.

Social Security, a Crucial Retirement Decision

Social Security is one of the best benefits that you can get for retirement. Your monthly payments are guaranteed by the full faith and credit of the U.S. government, which makes this program one of the safest sources of income on earth.

There is also a built-in cost-of-living-adjustment to offset inflation. However, it’s designed to only replace about 40% of pre-retirement income, according to the Social Security Administration. As a result, those who intend to depend solely on this income often find themselves caught financially between a rock and a hard place.

If you are trying to decide when you should start taking Social Security, there are several different factors to consider.

When Should You Claim Social Security Retirement Benefits?

One of the most important details to plan for is when you want to quit your job. If you plan on working until you are at least 70, then it would probably be wise to delay Social Security until you reach the maximum retirement age.

You can increase your total monthly benefits by about one-third this way, or by 8% per year for each year you wait.

And if you decide to start taking Social Security early while you continue to work? Then your benefits will be reduced on a dollar-for-dollar basis if your income exceeds a certain threshold until you reach full retirement age.

Social Security expert David Frietag estimates the decision of when to start benefits can impact your retirement plan by hundreds of thousands of dollars. It could even make a million-dollar difference in some cases for high-income earners.

The Influence of Health and Other Factors

But claiming Social Security early may be wise if you have health conditions or other factors that could mean a shorter lifespan.

It may also make sense if you are adept at investing and can generate significant revenue using your monthly benefits as principal.

The Center for Retirement Research reports that over 40% of men and nearly half of all women begin claiming benefits at age 62. This is the earliest age that you can claim benefits under any circumstances. But claiming benefits early comes at a cost.

If your full retirement age is 67 and you claim benefits at age 62, then you will reduce your monthly lifetime benefit by 30%. But this may still make sense for retirees who will receive a public pension once they reach a certain age but are then ineligible to receive Social Security benefits.

If they claim early, then they can receive benefits for a few years before their pensions begin.

Coordinate Social Security with Other Retirement Decisions

It’s also vitally important for you to coordinate when you begin taking benefits with your spouse if you are married. There are literally hundreds of different ways and times that you can choose.

Be sure to talk to a qualified retirement planner or Social Security expert before you finalize your plans. If you make a miscalculation here it could conceivably cost you hundreds of thousands of dollars in lost benefits. Make sure to collaborate on this issue with your spouse before choosing a specific alternative.

You will also need to coordinate your retirement savings with your Social Security payout as well as your job if you continue to work. If you are able to work until you turn 70, then you may not need to tap into your savings until then.

The longer you are able to wait to begin drawing on your savings, the more money you will have at your disposal when you finally do stop working.

This also gives you the chance to save more for retirement through your employer-sponsored retirement plan (and other accounts). You also reduce the time that you will have to make your savings last.

Maximize Your Social Security Benefits with Financial Guidance

Don’t hesitate to enlist the help of a qualified financial professional or retirement planner if you need to.

They may have ideas and resources to help you that you haven’t thought of. They can plug your income numbers into a sophisticated software program that can analyze a range of options, showing effective ways to manage your assets and elect for your benefits.

Many financial planners today say that you should draw no more than 3% of your retirement savings each year. It’s crucial that your portfolio is properly balanced between debt instruments and equities — and possibly even other vehicles, if right for you. You need to maintain a guard against inflation while generating sufficient income to live on.

Annuities can be another way to build a dependable, guaranteed stream of income. Fixed index annuities can also provide superior growth in many cases.

Don’t Forget the Effect of Taxes on Your Benefits

Also be sure to examine the tax impact of your Social Security benefits.

If you elect to begin receiving benefits while you are still working, then up to 85% of your benefits may be taxable as ordinary income. Not only that, they may be reduced by a certain amount based on your take-home pay.

Of course, at least some of your benefits may still be taxable if you have a pension or other source of income in addition to your Social Security benefits.

You may want to consider converting some or all of your retirement plan balances into a Roth IRA while you are still working and can afford to pay the taxes. This will effectively lower your taxable income during retirement. It can also help prevent your Social Security benefits from being taxed.

Count on Social Security in Your Income Plan

The 1.6% increase in Social Security benefits for 2020 will effectively help retirees to keep pace with inflation in their budgets. Although the long-term future of Social Security is unclear, it’s fiscally sound at this point and can form the basis for your retirement plan.

Just be sure to do your homework so that you can maximize your benefits over time.

Need Help with Maximizing Your Benefits?

Do you need help maximizing your benefits? Not sure about how Social Security benefits fit in with the rest of your retirement strategy?

No worries. Personal guidance and peace of mind are only a click away at SafeMoney.com.

Use our “Find a Financial Professional” section to connect with someone directly. You can request an initial no-obligation appointment to discuss your goals, concerns, and financial situation. Should you need a personal referral, call us at (877) 476-9723. 

The post It’s Official: Social Security Benefits Are Getting a 1.6% Boost in 2020 first appeared on SafeMoney.com.