Retirement Benefits This Is What You Need To Know About Social Security
In this episode, John discusses Social Security as one of the key sources of retirement benefits and income. He reviews the current state of the system, and what that means for you as your plan for your retirement.
John is the author of 5 Ways Your Wealth is Under Attack. He has lectured extensively on financial planning and has received the Five StarSM Wealth Manager Award for 2011, 2012, 2013, 2014, 2015 and 2016.
Don’t miss John’s takeaways:
- Social Security is important. For the average retiree, their Social Security check may be 33% of their gross income.
- What you pay in: If you make up to $132,900 annually, 7.65% of your income is going towards Social Security—or double that, if you’re self-employed. If you make above $132,900 your effective tax rate is lower, because you only pay Social Security tax on the first $132,900.
- Income tax on the benefit: As much as 85% of your benefit is going to be taxed as ordinary income, depending upon your income level.
- When to take Social Security: Begin by considering your health and your longevity.
- Collecting early: If you are willing to take a reduction of about 6.5% per year, you can take Social Security income as early as 62.
- Benefits to deferring: If you defer from 67 to 70, you can get an 8.5% increase in benefits per year. Survivor benefits are higher when deferred as well.
- Drawbacks to deferring: If you have a high income and expect a large benefit, you are likely to lose if you defer. If you withdraw from your portfolio rather than take your benefit, not only do you lose that cash, you lose its compounding potential if it had remained invested. If you don’t need the benefit, go ahead and take it—you can gift it or use it for a vacation.
For more, listen above, and download the guide. I get into the nitty gritty of how the benefit is taxed and the payouts for collecting early or deferring. Most importantly, schedule a time to come talk to us. In order to plan how Social Security fits into your retirement plan, you need information that is not generic, but specific to you. Visit us at smallwoodassociates.com and click the “let’s get started” button, connect with us on social media, or call us at (800) 797-1000.
I’m looking forward to hearing from you soon!