There are 3 things that everyone has to know about social security, Before retiring

Social Security benefits represent a crucial pillar of support for retirees, but grasping the intricacies before you bid farewell to your working days is essential. Here, we present three fundamental facts about Social Security that demand your attention as you prepare for retirement.

  1. Supplementary, Not Substantial: Social Security is designed to serve as a supplement to your retirement income, not its primary foundation. It will replace approximately 40% of your pre-retirement salary, falling well short of the 80% to 90% typically required to maintain your accustomed standard of living. This isn’t an oversight; it’s by design. Social Security was always intended to complement your retirement savings and any employer-provided pension. If you lack a pension, you’ll rely on just two income sources: Social Security and personal savings. To bridge the income gap, diligent saving is imperative.
  2. Timing Is Everything: The timing of when you claim Social Security benefits significantly impacts the amount you receive. Your standard benefit, based on your career’s average wages, is attainable if you claim at your Full Retirement Age (FRA). FRA varies from 66 and 6 months to 67, depending on your birth year. While you can claim as early as 62, doing so reduces your monthly benefit. The reduction equals 5/9 of 1% for each month ahead of FRA, cumulatively leading to a smaller annual benefit. Conversely, delaying past FRA boosts your benefit by 2/3 of 1% per month, culminating in an 8% annual increase until age 70. Balancing the desire for earlier income with the allure of higher benefits is essential.
  3. Tax Considerations Loom: Be aware that the IRS may levy taxes on your Social Security benefits when your countable income exceeds $25,000 for single filers or $32,000 for married joint filers. Up to 85% of your benefits could become subject to federal tax, contingent on your countable income level. Countable income encompasses half of all Social Security benefits, all taxable income, and certain non-taxable income sources. Some states also impose taxes on Social Security benefits, further impacting your overall tax liability.

These three key Social Security facts underscore the necessity of meticulous planning before retirement. Ensuring that your eventual Social Security benefits, coupled with your savings, provide a comfortable and financially secure post-retirement life hinges on comprehending these nuances.

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Disclaimer: The views, suggestions, and opinions expressed here are the sole responsibility of the experts. No Memphis Tidings journalist was involved in the writing and production of this article.