Navigating through social security benefits is not easy! That is why it is helpful to have an experienced financial advisor on your side who can help navigate you through the process. Here we take a moment to answer some of the most common questions we receive about Social Security benefits.
1) What is social security?
In 1935, social security was introduced as an effort to provide retirement income for certain American workers. The program quickly extended to cover most of the American workforce. Today, it remains “America’s Pension Plan” and the financial lifeline that many people rely on well into their old age.
2) When will I become eligible for Social Security benefits?
Eligibility for full retirement benefits can start as early as age 65 or as late as age 67, depending on the year you were born. You can receive Social Security benefits as early as age 62, however, your monthly benefits will be reduced. For example, if you start taking benefits at 62 and your full retirement age is 66, you will receive 25% less in monthly benefits. On the other hand, if you postpone taking benefits past your full retirement age, you will receive higher benefits (8% for each year up to age 70).
3) How is my eligibility determined?
Your Social Security eligibility is based on the credits earned during your working years. As of 2021, for every $1,470 you make, you earn one credit and up to a maximum of four per year. For individuals born in 1929 or later, 40 credits (or 10 years of full-time work) are needed to receive Social Security benefits at retirement.
From there, your benefits will be based on your highest 35 years of averaged earnings. If you didn’t work the full 35 years, your unemployed years will show zero income and would create a significant disadvantage to your earnings formula.
4) How much am I required to pay into Social Security?
As of 2021, American workers are required to contribute 6.2% of up to $142,800 of their income into Social Security with employers required to pay another 6.2%. Self-employed individuals must pay both portions or 12.4%.
5) Can I receive Social Security benefits if I’m still working?
Yes, if you’ve reached full retirement age and are still working, you can earn as much as you’d like and still receive full benefits. If you choose to receive benefits before your full retirement age, those benefits will be reduced temporarily. But don’t worry. Social Security will credit the money that is held from your reduced monthly benefits and pay out when you finally reach full retirement age.
6) Will I owe taxes on Social Security benefits?
Most likely, however, how much you owe is based on your income. As of 2020, the amount of Social Security benefits subject to taxation is based on the following:
- For couples who file jointly and have a combined income between $32,000 and $44,000, 50% of Social Security benefits will be taxed.
- For couples who file jointly and have a combined income of more than $44,000, 85% of Social Security benefits will be taxed.
- For singles with an income between $25,000 and $34,000, 50% of their Social Security benefits will be taxed.
- For singles with an income of more than $34,000, 85% of their Social Security benefits will be taxed.
Maggi Tax Advisory & Financial Group can help maximize your Social Security benefits!
Want to make the most of your Social Security benefits? Maggi Tax Advisory & Financial Group can help! To learn more about our financial services, please call our Hillsborough office at (813) 850-0131 and our Pinellas/Pasco office at (727) 351-6168.
