It’s simpler than you think to throw away retirement funds.
Do you want to get the most money out of Social Security? That’s a rhetorical question. So, naturally, you demand more from a retirement benefit that will last the rest of your life. Here’re six tips to help you get every penny you deserve from Social Security.
1. Check your earnings history.
Your payout is calculated by Social Security based on your earnings history. Therefore, the benefit will be artificially low if your earnings history is incomplete.
Create an account at my Social Security to access your earnings data. You can also request that the Social Security Administration mail you a copy of your earnings record by completing Form SSA-7004.
If there’s an income missing from your file, gather all your tax returns, pay stubs, and other documents and contact your local Social Security office.
2. Report side hustle earnings
Your side hustle earnings are taxed. Failure to record such money might get you in hot water with the IRS. Furthermore, unreported income won’t appear on your earnings record, reducing your Social Security payout.
Your self-employment income will most likely be reported on your tax returns using IRS Form 1040, Schedule C, and Schedule SE. Schedule SE will determine your self-employment tax, including your Social Security and Medicare contributions.
3. Work for 35 years or more
To calculate your payout, the Social Security algorithm averages your previous earnings. This average takes into account the 35 years in which you earned the most money. If you’ve worked for less than 35 years, the average computation fills in the gaps with zeros.
Assume you’ve been working for 30 years and have earned $50,000 over that time. Your 35-year average is $42,860 if you assume no income for five years. The average rises with each new year of service, reaching $50,000 after 35 years of service.
The point is – you should work 35 years, if you can. As a result, you should avoid having zero-income years that dilute your profits and, thus, your benefit.
4. Wait until full retirement age (FRA) to collect
Your FRA is the age at which you’re eligible for your full, unreduced Social Security payment. Your payout will be reduced if you begin receiving Social Security before FRA. Each month you accelerate your benefit compared to FRA; Social Security deducts a portion of your payment. That overall reduction might be as much as 30%.
5. Manage your earnings
Income limitations apply if you’re working and receiving Social Security before FRA. If you exceed certain limits, your benefits will be decreased.
With an increase in your taxable income, you may also experience a Medicare-related reduction in your Social Security. Higher taxable income (including investment income) may result in a new or increased Medicare premium surcharge on your Social Security benefits. That might happen if you converted to a Roth IRA or made a substantial investment gain.
To make matters even more complicated, the surcharge will be applied to your benefit two years after the money was earned.
In the case of a Roth conversion, you might be willing to accept a temporary reduction in your Social Security benefits in exchange for placing your money into a tax-free account. In some cases, though, planning the time of your income may help you reduce or eliminate an additional surcharge.
6. Pay off your debts.
For some sorts of outstanding debts, Social Security will garnish your benefits. These include unpaid federal taxes, child support, alimony, student loans owed to the Department of Education, and court-ordered victims’ restitution. To challenge a garnishment, you must go directly to the IRS, not Social Security. You’d most certainly require the assistance of an attorney, so avoid these scenarios if possible.
Utilize Social Security to the fullest extent possible
Even under the best of conditions, Social Security doesn’t provide much. The federal retirement benefit replaces around 40% of the average worker’s working salary. If possible, try to keep close to that standard.
Correcting missing or incorrect earnings, waiting until FRA to collect, flattening your income surges, and paying your bills on time will help you avoid missing out on Social Security benefits.
Contact Information:
Email: [email protected]
Phone: 2129517376
Bio:
M. Dutton and Associates is a full-service financial firm. We have been in business for over 30 years serving our community. Through comprehensive objective driven planning, we provide you with the research, analysis, and available options needed to guide you in implementing a sound plan for your retirement. We are committed to helping you achieve your goals. Visit us at MarvinDutton.com . Tel. 212-951-7376: email: [email protected].
