As you close in on retirement age, there are sure to be many things on your mind. For many, relying on social security will soon become a way of life. While this may not be the ideal situation, for some, social security is all they will have. The more you know about this before you retire the better off you are going to be.
Here are four things to know about social security benefits:
- What is your full retirement age? You need to answer because it will tell you when you are able to receive full social security benefits. If you retire earlier, you will only qualify for a reduced benefit.
Full retirement age is as follows: 65 for those born in 1937 or earlier; 67 for those born in 1960 or later; those who were born between 1938 and 1959 will have a full retirement age somewhere between 65 and 67.
- Should I jump the gun and take my benefits at the age of 62? While you have the right to do so, remember this: you are going to receive a reduced benefit. If you can wait a few more years, you will receive more money.
Did you know that if you take benefits before full retirement age, and earn more than your annual earnings limit, your benefit will be reduced. For example, the 2010 earnings limit is $14,160. Those who earn more than this, which is a large number, will receive a reduced benefit. So not only are you giving up money for collecting before full retirement age, but you lose more if you make too much money.
- Tax on social security benefits. This is one of the details that many people forget to look into before retiring. Will you be required to pay taxes on the money you receive? If you earn money in ways outside of social security you may be required to pay taxes on the money. Other sources of income can include anything from a pension, to wages, to interest earned. It is important to consider this, because it means that you will not be receiving quite as much money as you thought.
- What is the spousal benefit for? If married, you can claim your own social security based on what you have earned in the past, or you can opt for a spousal benefit. In many cases, this allows you to receive more money. The social security department will set you up with the benefit that offers the most money.
If you are interested in learning more about social security, the above five details are a great place to start. They touch on the most common questions concerning this benefit, and the effects that the income will have on your life.