If you’re like most retirees, Social Security is likely to play an important role in your retirement. The Social Security Administration estimates that 90 percent of all Americans over age 65 receive Social Security benefits. 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
As you approach retirement, you’ll likely have to make a number of important financial decisions. One of the biggest may be when and how to file for Social Security benefits. 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 while continuing to work.
You’re eligible to file for Social Security benefits as early as age 62. In fact, that’s when many retirees do file for benefits. However, if you file before your full retirement age (FRA), you could see your benefits reduced as much as 35 percent.2
However, that reduction could be far greater if you file for benefits while you’re still working. 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.
Expecting too much income from Social Security.
Expecting to use Social Security benefits to fund most of your lifestyle in retirement? You may want to rethink that strategy. While Social Security is a helpful resource, for most people it’s not enough to cover all expenses. The average monthly Social Security benefit is just over $1,300. In fact, Social Security benefits are capped at nearly $2,700.4
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.
Forgetting to budget for Medicare premiums.
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 UBC Retirement Income Planning. 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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