According to the Social Security Administration, 90 percent of all Americans age 65 and older rely on Social Security benefits for income. It’s an important program that plays a role in nearly every retiree’s life. In fact, 50 percent of married retirees and 71 percent of singles say they count on Social Security for more than half of their retirement income.1
It’s likely that Social Security will play a role in your retirement. As you approach retirement, you’ll likely have to make important decisions about when to file and how much income you will need beyond your Social Security benefit.
Without a solid strategy in place, you could face financial challenges. You may even be unable to fund the kind of retirement you’d like for yourself. Below are a few common Social Security mistakes. If you can avoid these, you’ll minimize your risk and save yourself some financial headaches.
Filing for early benefits and continuing to work.
The earliest you can file for Social Security benefits is age 62. If you file before your full retirement age (FRA), however, you could see your benefits reduced as much as 35 percent.2 Despite the reduction, many retirees choose to file as soon as they’re eligible.
You can actually file early and continue to work, but doing so could compound your reduction. If you file before the year of your FRA, Social Security allows you to earn as much as $17,040 with no penalty. However, your benefit is reduced by $1 for every $2 you earn past that threshold.3 You can file at your FRA and continue working and see no reduction in benefits.
Relying too much on Social Security.
While Social Security is a helpful resource, it probably won’t fund your entire retirement. The average monthly Social Security benefit is just over $1,300. In fact, Social Security benefits are capped at nearly $2,700 per month.4
It’s likely that you’ll need some income above and beyond your Social Security benefit. This income could come from savings and investments, a pension or possibly even part-time work. If you don’t know where your additional income will come from, now may be the time to develop a strategy.
Failing to budget for Medicare.
Medicare is another valuable resource for retirees. The Medicare program offers several different types of coverage, known as “parts.” Part A, which is standard and free for all retirees, covers hospitalizations and emergency treatments. Part B covers doctor visits and outpatient services, while Part C offers supplemental coverage and Part D covers prescription drugs.
It’s important to remember that Part A is the only coverage that does not have a premium. All the other parts do have premiums, which are usually paid out of your Social Security benefit. Be sure to get an estimate of those premiums before you file so you can project your net Social Security benefit and budget accordingly.
Ready to plan your Social Security strategy? Let’s talk about it. Contact us today at J. Harris Financial. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
The material is not intended to be legal or tax advice. The insurance agent can provide information, but not advice related to social security benefits. Clients should seek guidance from the Social Security Administration regarding their particular situation. The insurance agent may be able to identify potential retirement income gaps and may introduce insurance products, such as an annuity, as a potential solution. Social Security benefit payout rates can and will change at the sole discretion of the Social Security Administration. For more information, please consult a local Social Security Administration office, or visit www.ssa.gov
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