How to Solve five Common Social Security Problems

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Source:   —  April 22, 2016, at 10:27 PM

Get care to avert these mistakes that'll reduce your retirement payout.

How to Solve five Common Social Security Problems

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The Social Security rules are complex, and it might get some effort to maximize your retirement payments. But there are a variety of strategies you can utilize to expand the cost of your benefit. Here'south how to avert five potential Social Security pitfalls.

You don't know how much you'll get in retirement. Most workers obtain a paper Social Security statement in the mail once every five years. However, you can view your Social Security statement online at any time by creating a my Social Security account at ssa. gov/myaccount. "Everybody should obtain their Social Security statement by setting up their Social Security account online," says Andy Landis, author of "Social Security: The Inside Story." This document will tell you how much you've earned and paid into Social Security throughout your career and give you a personalized estimate of how much you'll get from Social Security if you sign up for your benefit at various ages. The statement also lists the quantity you could claim if you become disabled and how much your family members would get if you pass away. These numbers are updated annually to reflect your continued earnings.

[See: ten Ways to Expand Your Social Security Payments.]

You wish to obtain bigger monthly payments. There are several ways to boost your Social Security payments. Earnings of up to $118.500 in two thousand-sixteenth are factored into Social Security benefits, so a higher salary up to this limit will result in bigger retirement payments. The thirty-five years in which you earn the most are used to compute your Social Security benefit, and working an additional year at a high salary will cancel out a year when you earned less or nothing. "If the latest year you're working will replace one of the years of your thirty-five that was lower, that's going to bump up your Social Security payment," says Ryan Thomas, a certified financial planner for Column Capital Wealth Management in Indianapolis. The age you sign up for Social Security also plays a large role in the size of your payments. Social Security payments are reduced if you claim them before your full retirement age, which is sixty-six for most baby boomers and sixty-seven for everyone born in one thousand nine hundred-sixtieth or later. Payments expand if you delay claiming them after your full retirement age up until age seventy.

You signed up for reduced payments and regret it. It'south tempting to claim Social Security when you're first eligible to do so at age sixty-two. However, if you sign up for Social Security at age sixty-two, you get twenty-five % smaller payments. If you later regret your decision to get a reduced benefit, you've a couple options to boost your payments later. Within twelve months of starting Social Security, you've the option to repay all the money you received, without interest, and withdraw your Social Security application. You can then sign up for bigger payments at a later date. Another option if you're between ages sixty-six and seventy is to suspend your Social Security payments, which will authorize you to earn delayed retirement credits and qualify for higher payments later when you resume them. This strategy will expand your payments by eight % for each year of suspension.

[Read: How to Undo Claiming Social Security Early.]

You're paying tax on your Social Security payments. You might've to pay tax on portion of your Social Security payments if you've other sources of income in retirement. If the sum of your adjusted gross income, nontaxable interest and half of your Social Security benefit tops $25.000 for individuals and $32.000 for couples, income tax could be due on half of your benefit. If those income sources exceed $34.000 for individuals and $44.000 for couples, up to eighty-five % of your benefit could be taxable. Traditional four hundred one(k) and IRA withdrawals, pension payments, interest, dividends and earnings from working could create portion of your Social Security benefit taxable. However, traditional four hundred one(k) and IRA withdrawals taken before you sign up for Social Security won't impact your Social Security payments. And Roth IRA withdrawals in retirement are typically not taxable and won't contribute to your Social Security benefit being taxable. "One strategy may be to utilize up all your four hundred one(k) before you start taking your Social Security benefit," says Laurence Kotlikoff, an economics Prof at Boston Univ and co-author of "Obtain What'south Yours: The Secrets to Maxing Out Your Social Security." "Or you could get your money and secret it to a Roth before you start taking your Social Security benefit."

[Read: How to Reduce Taxes on Your Social Security Payments.]

You wish to return to work after claiming payments. If you work while receiving Social Security benefits between ages sixty-two and sixty-six, portion of your Social Security benefit could be temporarily withheld. The earnings limit for people ages sixty-five and younger is $15.720 in two thousand-sixteenth, after which $1 in benefits is temporarily withheld for every $2 earned over the limit. If you'll turn sixty-six in two thousand-sixteenth, the earnings limit is $41.880, and the benefit reduction declines to $1 withheld for every $3 in excess earnings. Once you turn sixty-six, working while claiming Social Security payments won't result in any benefit withholding, and your payments will be recalculated to give you credit for any withheld payments and your extra earnings. "If you work after age sixty-six there'south number penalty," says Joseph Matthews, an attorney and author of "Social Security, Medicare & Government Pensions: Obtain the Most Out of Your Retirement & Medical Benefits." "You can create million in income and it doesn't affect your Social Security benefit."

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