As you near retirement it’s important to start thinking about your Social Security options. Consider when you want to begin taking withdrawals and the potential tax obligations. Here are some of the key issues to think about.
Currently, normal benefits begin between the ages of 65 and 67. Review your annual Social Security statement for your estimated benefit and retirement age. If something isn’t right or information is missing, now’s the time to start fixing it!
If you elect to take early benefits, you’ll be subject to income limits. In the years before you reach your full benefit age, your benefit will be reduced by $1 for every $2 you earn over $15,720. (For 2016; indexed for inflation).
In the year you reach your normal benefit age, the benefit will be reduced by $1 for every $3 you earn over $41,880. (For 2016; indexed for inflation). It is important to be aware of these limits since your Social Security benefit gets reduced.
Another option you have is to delay when you begin receiving benefits. Most Social Security recipients will get an eight percent annual benefit increase each year they choose to delay Social Security until age 70. This can be a helpful option to boost retirement income. But it will be important to factor in your life expectancy.
Depending on your combined income and tax filing status, a portion of your Social Security benefits may be taxable. If your Social Security benefits become taxable, you can set up federal withholdings from your monthly payments. Another option is to make estimated quarterly tax payments.
Navigating Social Security can seem like a confusing process, but it doesn’t have to be. Take time to research your options. Then set up an appointment at your local Social Security office to find the best plan for you.
Article provided by Local Government Federal Credit Union.