Will You Be Claiming Social Security Soon?
Updated: Dec 21, 2022
Approximately nine out of ten people aged 65 or older are claiming Social Security benefits as of June of 2022. For the elderly beneficiaries receiving Social Security, around 12% of men aged 65 or older and nearly 15% of women in the same age group rely on Social Security income for 90% of their living needs. The days of pensions, unless you’re fortunate enough to have had a government job or a unique privately owned corporation that still provides pensions are practically nonexistent. Are you going to have enough in your retirement accounts to meet your needs?
It's important to note that when considering taking Social Security, one should have an analysis run on what the effects of timing play in your financial outlook. Social Security optimization is key to gaining the best strategy for timing of filing for Social Security.
Additionally, one needs to consider tax brackets as a component in strategizing the entire retirement plan’s outcome. Things to look at include RMD’s (Required Minimum Distributions,) for those who have qualified accounts that will be taxed upon withdrawals. What are RMD’s? This is the amount that the IRS requires you to withdrawal at no later than age 72 each year, so they can receive the taxes you have deferred for all the years you had your qualified account open and contributed to your fund. Also, does the portfolio have any tax-free elements included?
Addressing social security questions without examining the big picture could mean the difference between living comfortably and running out of money before death.
Obviously, inflation will play a huge role in how your retirement is affected. Most people will not be relying solely upon social security to see them through retirement; and it was never intended to be the lone source of income in retirement. If you’ve been fortunate enough to have set up a plan when you were younger, along with having an expert advisor who keeps up with regulations changes, market performance/trends, and newer financial strategies, including alternative investments, you should be positioned to have a comfortable retirement income that includes your supplemental social security income. Plus, once you claim social security, you will receive cost of living adjustments during retirement.
Let’s focus on the taxes for a minute. According to AARP:
The portion of your benefits subject to taxation varies with income level. You’ll be taxed on:
up to 50 percent of your benefits if your income is $25,000 to $34,000 for an individual or $32,000 to $44,000 for a married couple filing jointly.
up to 85 percent of your benefits if your income is more than $34,000 (individual) or $44,000 (couple).
Say you file individually, have $50,000 in income, and get $1,500 a month from Social Security. You would pay taxes on 85 percent of your $18,000 in annual benefits, or $15,300. Nobody pays taxes on more than 85 percent of their Social Security benefits, no matter their income.
Why this is so important, is that you will be taxed at whatever your current tax bracket is and for many people, they do not realize there are several strategies that can be used to shift assets and avoid paying the taxes on the social security.
If you have an agent that can design a plan to get you to a zero-tax bracket, congratulations -- you’ve won the game! The bottom line: take care in deciding when to draw social security, and if you are not certain about it, reach out and get a free diagnostic audit. We are your educational resource. It could mean the difference between saving thousands and running out of money in retirement.
Please call us at 775-325-4649 or email us at firstname.lastname@example.org. You can also find on-demand free educational content on our website at www.mvplwrc.com.