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5 Social Security Rules You Might Not Know (And Could Cost You)

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Personal Finance

Retirement Planning

June 1, 2019

Did you know that social security payments are nearly half of retirees monthly income?According to the Center of Budget and Policies Priorities, “For someone who worked all of his or her adult life at average earnings and retires at age 65 in 2018, Social Security benefits replace about 39 percent of past earnings.” According to the same study, that results in about $1,413 per month or $17,000 per year.To get the most out of your social security benefits and end up getting the most you can, make sure you know these five rules.Without knowing them, you might end up leaving money on the table and not being able to live as comfortably in retirement.

1. Social Security Income is Based on Your Best 35 Years

Your Social Security payments are calculated by averaging out the 35 years that you earn the most in your career. It’s important to note that if you don’t work 35 years, all years are replaced with zero income.But if you work for more than 35 years, you can drop lower earning years and which help increase your earnings per year. This will help you receive more income once you begin to withdraw.

2. Workers Can Access Retirement Benefits at 62 Years Old

If you’re approaching retirement age, it’s important to note that workers can start tapping into benefits at 62 years old. But if you do choose to start accessing the benefits before 65, your monthly payments are reduced between 25 to 30 percent.The longer you can wait, 65 or 67 depending on your date of birth, the more you will receive in Social Security Income.

3. Full Retirement Begins at 66 For Baby Boomers

So what is the exact age to retire? It depends on multiple factors including your savings, estimated income in retirement, and other factors.But if you were born between 1943-1954, you are eligible to claim unreduced Social Security benefits once you turn 66. People born after 1960 or later become eligible for the full retirement benefit once they turn 67.Waiting until 70 will increase your monthly payments the most and waiting any longer doesn’t have any additional benefits.If you’re unsure about when the best time is for you, make sure to set up a complimentary consultation with our team to learn more.

4. Social Security Earnings Limit in 2019

If you work and collect Social Security before your full retirement age, part of your payments could be temporarily withheld if you earn more than $17,640 in 2019. Beneficiaries that exceed the $17,640 amount will have one dollar in benefits with led for every two dollars in income that is above the limit.If you reach full retirement age in 2019 your income limits is increased to $46,920 before anything is withheld. Plus, the penalty declines to one dollar withheld for every three dollars in excess of the near $47,000.

5. Updated Tax Cap for Social Security

Each year Social Security changes the tax cap. For 2019, the maximum taxable amount is $132,900. Anything after that isn’t withheld or used to calculate retirement benefits.Hopefully these Social Security rules will help you plan for a better retirement. If you’d like planning or have any questions, make sure to schedule a consultation with one of our trusted advisors.

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