Michael Littledike is a financial advisor who assists clients with investment and retirement planning at his firm, Capita Financial Network. In his role as company president, Michael Littledike has helped numerous individuals over the years get the most out of their social security benefits.
Before you claim your social security benefits, you should consider the following:
1. The age at which you file plays a big role in how much you will receive.
You can file for Social Security when you turn 62, but if you collect benefits before you reach full retirement age, you can permanently reduce your payments. Therefore, it’s vital that you know what your full retirement age is. If your birth year is between 1943 and 1954, your full retirement age is 66; and this number steadily inches towards 67 if you were born between 1955 and 1959. Those born in or after 1960 have a full retirement age of 67.
2. The Social Security Administration calculates your benefit based on your top 35 years of earnings.
The bad news is that each year you didn’t earn anything will count as a zero if you haven’t worked for the full 35 years. However, you can replace those net-zero years by working a few years longer. Further, your benefit isn't calculated on 35 consecutive working years. Instead, it is based on the highest-earning 35 years. This means that if you want to continue working part-time, your benefits won’t change at all if you have already accumulated 35 years of higher wages. Even better, your benefits could actually increase if your job pays better than your previous positions.
3. You might have to pay taxes on your Social Security benefits.
Benefits used to be tax-free, but that changed in 1984. Nowadays, you don’t need to receive much to trigger the income tax threshold. For instance, a married couple might be taxed on up to 50 percent of their benefits if they receive more than $32,000, and people with higher benefits may have to pay income tax on more than 80 percent of their benefits.
Before you claim your social security benefits, you should consider the following:
1. The age at which you file plays a big role in how much you will receive.
You can file for Social Security when you turn 62, but if you collect benefits before you reach full retirement age, you can permanently reduce your payments. Therefore, it’s vital that you know what your full retirement age is. If your birth year is between 1943 and 1954, your full retirement age is 66; and this number steadily inches towards 67 if you were born between 1955 and 1959. Those born in or after 1960 have a full retirement age of 67.
2. The Social Security Administration calculates your benefit based on your top 35 years of earnings.
The bad news is that each year you didn’t earn anything will count as a zero if you haven’t worked for the full 35 years. However, you can replace those net-zero years by working a few years longer. Further, your benefit isn't calculated on 35 consecutive working years. Instead, it is based on the highest-earning 35 years. This means that if you want to continue working part-time, your benefits won’t change at all if you have already accumulated 35 years of higher wages. Even better, your benefits could actually increase if your job pays better than your previous positions.
3. You might have to pay taxes on your Social Security benefits.
Benefits used to be tax-free, but that changed in 1984. Nowadays, you don’t need to receive much to trigger the income tax threshold. For instance, a married couple might be taxed on up to 50 percent of their benefits if they receive more than $32,000, and people with higher benefits may have to pay income tax on more than 80 percent of their benefits.