The Social Security Review Every Near-Retiree Should Do
After decades of working, you’re finally allowed to tap into Social Security when you hit age 62.
That extra income may be tempting, especially as we wrestle with high costs for gas, groceries, utilities, housing and more. But for many near-retirees and retirees, it makes sense to wait to receive your benefits. Regardless of when you plan to tap into the program, it’s essential to review some overlooked Social Security details that can permanently shrink your monthly income.
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Start with your Social Security Statement
You can start your review with your Social Security statement, which you can access by logging into your account on the Social Security Administration’s website. This statement shows lifetime earnings and your estimated retirement benefits at different claiming ages.
Check your worker’s earnings record. Those records help the Social Security Administration determine how much you’ll receive in benefits, so it’s crucial that they’re accurate. Any inaccuracies can result in a lower benefit. Verify the records with your old W-2s, tax returns and pay stubs. Pay careful attention to years in which you changed jobs or were self-employed, since those years may have missing information.
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Compare claiming ages, not just the monthly number
While you are checking your earnings history, you also get to see how your estimated benefit changes based on when you claim benefits. You can see how much you will likely receive if you access Social Security at 62, full retirement age, 70 or any age in between.
Delaying Social Security will result in a higher benefit. However, some people don’t wait until they turn 70 because they need the immediate cash flow. It may be easier to transition from full-time work to a part-time job if you take out Social Security earlier. Health, work plans and life expectancy should also play a role in when you claim benefits.
Married couples should coordinate when they take out benefits. It often makes sense for the higher earner to wait until 70. That way, the higher-earner’s Social Security benefits can boost the lower-earning spouse’s survivor benefit, if applicable. You may want to use the bridge strategy, which involves living on your savings to delay claiming benefits.
Check the details that can trip up a claim
While your earnings history is one of the most important factors to check, there are other details that you should also check. A portion of your Social Security benefits may be taxable, depending on your combined income. Therefore, you should assess when you want to retire and map that out before claiming benefits. It can also be beneficial to use tax-deferred retirement accounts as a bridge to spread your tax burden over time while maximizing your benefits.
Set up your social Security account and put in personal details like your direct deposit information before you are ready to claim benefits to minimize delays. Remember, you don’t have to master every nuance of Social Security and understand every little detail about your statement. However, auditing your information and creating a Social Security account now can help prepare you for when you claim benefits. You can also use this information to determine the best time to access Social Security.