Social Security is the most effective federal program in the US. Almost 66 million Americans get monthly benefits, with payments totaling more than $1 trillion this year. Furthermore, another 182 million Americans presently work in positions covered by Social Security, implying that they will most likely get benefits in the future.
Like many federal programs, Social Security has nuanced regulations and limitations that make it challenging to comprehend. Here are four mistakes that can cost retirees and their spouses a lot.
Filing for Social Security Too Early
Your average earnings determine your monthly Social Security payment amount during your 35 highest-paying years of employment. Also, your age when you begin collecting benefits is still considered in factoring your average earnings.
Even if you are still working, you are eligible for Social Security at 62. However, you will not qualify for the full benefit (also known as the principal insurance amount, or PIA) until you reach full retirement age (FRA). Suppose you apply for Social Security before the FRA. In that case, you will face a permanent reduction in payments of up to 30%, though the exact amount varies on when you receive your first check.
Delaying Social Security beyond FRA, on the other hand, results in a permanent boost in payments of 8% per year. However, these delayed retirement credits cease accruing at the age of 70. In other words, retired workers can optimize their Social Security payments by deferring benefits until 70, but delaying any longer is pointless.
Ignorance of Social Security Spousal Benefits
The spouse of a retired worker may also be eligible for Social Security payments based on that person’s wages, but spousal benefits are calculated differently. Most significantly, spouses can receive up to 50% of a retired worker’s PIA. However, the amount spouses receive each month is determined by the age they apply for benefits.
Again, eligibility begins at age 62. Spousal benefits, like those provided to retired employees, are permanently reduced if spouses claim Social Security before FRA. However, this scenario has no credit for postponing benefits beyond FRA. Nonworking spouses can increase their Social Security income by beginning benefits in the month they attain FRA. Waiting any longer makes no sense.
Specific individuals lack the luxury of waiting until FRA.
Failure To Enroll in Medicare During the Open Enrollment Period
Medicare, or the Federal Medicare Program, is a health insurance plan for those over 65. When Social Security recipient reaches age 65, they are automatically enrolled in Medicare Part A (inpatient insurance) and Medicare Part B (outpatient insurance). Medicare applications must be submitted by 65-year-old seniors who have not yet applied for Social Security.
In that case, your Initial Enrollment Period (IEP) begins three months before your 65th birthday. It ends three months after your 65th birthday. For example, if your 65th birthday is in June 2023, your IEP will last from March 2023 to September 2023.
Medicare Part A is free for seniors who have paid Medicare taxes for at least ten years, while Part B requires a premium, which increases if you sign up late. If you miss your IEP, you’ll usually have to wait until the next General Enrollment Period. You’ll have to pay a 10% monthly late enrollment penalty (based on the average Medicare Part B premium) for each full year you don’t sign up. To make matters worse, you must pay the penalty for the duration of your enrollment in Medicare Part B.
Most Retirees Overlook The $18,984 Social Security Bonus.
Most Americans are behind on retirement savings for a couple of years (or more). However, a few little-known “Social Security secrets” could help you increase your retirement income. For example, a straightforward method might earn you up to $18,984 yearly! We believe that you can retire securely if you understand how to optimize your Social Security benefits.
Not considering Social Security Tax
Many Americans appear to be uninformed that the federal government may tax Social Security benefits. However, your total income will determine the total tax liability. Therefore, your Social Security benefits might be taxed regardless of your financial situation.
Conclusively, you must take note of these social mistakes to avoid ruining your retirement benefit.
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Bio:
After entering the financial services industry in 1994, it was a desire to guide people towards their financial independence that drove Aaron to start Steele Capital Management in 2013. Armed with an extensive background in financial planning and commercial banking coupled with a sincere passion for helping people, Aaron has the expertise and affinity for serving the unique needs of those in transition. Clients benefit from his objective financial solutions and education aligned solely with
helping them pursue the most comfortable financial life possible.
Born in Olympia, Washington, Aaron spent much of his childhood in Denver, Colorado. An area outside of Phoenix, Arizona, known as the East Valley, occupies a special place in Aaron’s heart. It is where he graduated from Arizona State University with a Bachelor of Science degree in Business Administration, started a family, and advanced his professional career.
Having now returned to his hometown of Olympia, and with the days of coaching his sons football and baseball teams behind him, he now has time to pursue his civic passions. Aaron is proud to serve on the Board of Regents Leadership for Thurston County as the Secretary and Treasurer for the Morningside area. His past affiliations include the West Olympia Rotary and has served on various committees for organizations throughout his community.
Aaron and his beautiful wife, Holly, a Registered Nurse, consider their greatest accomplishment having raised Thomas and Tate, their two intelligent and motivated sons. Their oldest son Tate is following in his father’s entrepreneurial footsteps and currently attends the Carson College of Business at Washington State University. Their beloved youngest son, Thomas, is a student at Olympia High School.
Focused on helping veterans and their families navigate the maze of long-term care solutions, Aaron specializes in customized strategies to avoid the financial crisis that care related expenses can create. Experience has shown him that many seniors are not prepared for the economic transition that takes place as they reach an advanced age.
With support from the American Academy of Benefit Planners – an organization with expertise and resources on the intricacies of government benefits – he helps clients close the gap between the cost of care and their income while protecting their assets from depletion.
Aaron can help you and your family to create, preserve and protect your legacy.
That’s making a difference.
Disclosure:
Investment advisory services are offered through BWM Advisory, LLC (BWM). BWM is registered as an Investment Advisor located in Scottsdale, Arizona, and only conducts business in states where it is properly licensed, notice has been filed, or is excluded from notice filing requirements. This information is not a complete analysis of the topic(s) discussed, is general in nature, and is not personalized investment advice. Nothing in this article is intended to be investment advice. There are risks involved with investing which may include (but are not limited to) market fluctuations and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making any investment decision. You should consult a professional tax or investment advisor regarding tax and investment implications before taking any investment actions or implementing any investment strategies.
