Millions of Americans collect Social Security when they retire, and many end up using it to live on. Benefits are designed to only cover 40% of a previous income.
In all, 65 Americans utilize the Social Security system.
This means those who may end up relying so heavily on payments should do the most to get the biggest benefit.
Here are three things to keep in mind so you get the most you can out of Social Security
First, know that Social Security is taxable.
The federal government taxes Social Security benefits, and your state might too.
You can plan ahead for your taxes.
Paying federal taxes depends on income.
If you have other income, you’re more likely to be taxed.
Not every state taxes your benefits.
States that tax your benefits include
- New Mexico
- Rhode Island
- West Virginia
Another tip to keep in mind is that when you choose to collect benefits will impact your payment for the rest of your life.
If you want 100% of your benefit you cannot claim until your full retirement age of 66 or 67, depending on the year you were born.
Choosing to retire at age 62 can cause you to lose up to 30% of your retirement.
This means if your monthly benefit is worth $1,000, you’ll only see around $700 when you retire at 62 instead of 66-67.
You could also wait until age 70, and gain 8% per year between your FRA and 70.
Finally, the third key thing to keep in mind is having a plan for your spouse as well.
If both you and your spouse are entitled to Social Security, you need to look at ages and taxation.