Understanding the Basics of Social Security
Social Security is a federal program that provides financial support to retirees, disabled individuals, and their families. It was established in 1935 as part of President Franklin D. Roosevelt’s New Deal to provide a safety net for the elderly and disabled. Today, it is funded by payroll taxes and provides benefits to over 64 million Americans.
The amount of Social Security benefits you receive depends on your lifetime earnings, the age at which you start receiving benefits, and your marital status. You can start receiving benefits as early as age 62, but the longer you wait (up to age 70), the higher your monthly benefit will be. If you’re married, you may also be eligible for spousal or survivor benefits.
However, navigating the Social Security system can be complex. There are many rules and regulations to understand, and making the wrong decision can cost you thousands of dollars in lost benefits. That’s why it’s important to educate yourself about the system and avoid common filing mistakes.
Common Misconceptions about Social Security Filing
One common misconception about Social Security is that you should start receiving benefits as soon as you’re eligible. While this may be the right decision for some people, for others, it could result in significantly lower lifetime benefits. If you’re in good health and can afford to wait, it may be beneficial to delay receiving benefits until you’re older.
Another misconception is that Social Security benefits are not taxable. In reality, up to 85% of your benefits can be taxed, depending on your income level. This is something to keep in mind when planning for retirement.
Many people also believe that they can continue working while receiving full Social Security benefits. However, if you’re younger than your full retirement age and earn more than a certain amount, your benefits may be temporarily reduced.
The Top Five Filing Mistakes You Must Avoid
The first mistake to avoid is filing for benefits too early. While you can start receiving benefits at age 62, doing so will permanently reduce your monthly benefit amount. If you can afford to wait, it’s often better to delay filing until you’re older.
The second mistake is not considering your spouse’s benefits. If you’re married, you may be eligible for spousal or survivor benefits, which could be higher than your own benefits. It’s important to coordinate your filing strategy with your spouse to maximize your combined benefits.
The third mistake is not accounting for taxes. As mentioned earlier, up to 85% of your Social Security benefits can be taxed. You should factor this into your retirement planning to avoid any unpleasant surprises.
The fourth mistake is not checking your earnings record. Your Social Security benefits are based on your lifetime earnings, so it’s crucial to ensure that your earnings record is accurate. If there are any errors, you should correct them as soon as possible.
The fifth mistake is not seeking professional advice. Navigating the Social Security system can be complex, and making the wrong decision can cost you thousands of dollars in lost benefits. A financial advisor can help you understand your options and make the best decision for your situation.
Practical Tips to Navigate Social Security Successfully
To navigate Social Security successfully, start by educating yourself about the system. Understand the basics of how benefits are calculated, when you can start receiving benefits, and how your benefits may be taxed.
Next, consider your personal situation. Your health, financial needs, and marital status can all affect when you should start receiving benefits.
Also, regularly check your earnings record for accuracy. If you find any errors, correct them as soon as possible to ensure you receive the benefits you’re entitled to.
Finally, consider seeking professional advice. A financial advisor can help you understand your options and make the best decision for your situation.
How to Correct Filing Mistakes and Maximize Your Benefits
If you’ve made a mistake when filing for Social Security, don’t panic. In many cases, you can correct the mistake and potentially increase your benefits.
If you started receiving benefits too early, you may be able to suspend your benefits and restart them later at a higher rate. If you’ve been receiving benefits for less than 12 months, you may be able to withdraw your application and repay the benefits you’ve received, effectively resetting your benefits.
If you’ve made a mistake on your earnings record, contact the Social Security Administration to correct the error. This can potentially increase your benefits.
To maximize your benefits, consider delaying receiving benefits until you’re older, coordinating your filing strategy with your spouse, and factoring in taxes when planning for retirement.
Future Planning: Making the Most of Your Social Security Benefits
Planning for the future is crucial to making the most of your Social Security benefits. Start by understanding how much you can expect to receive in benefits and when you can start receiving them.
Next, consider your personal situation. If you’re in good health and can afford to wait, it may be beneficial to delay receiving benefits until you’re older. If you’re married, coordinate your filing strategy with your spouse to maximize your combined benefits.
Also, factor in taxes when planning for retirement. Up to 85% of your Social Security benefits can be taxed, so it’s important to plan accordingly.
Finally, consider seeking professional advice. A financial advisor can help you understand your options and make the best decision for your situation. At Perissos Private Wealth, we specialize in helping individuals navigate the complexities of Social Security and maximize their benefits. Contact us today to learn more.
All my best,
Sources:
1. Social Security Administration. (2020). Understanding the Benefits. https://www.ssa.gov/pubs/EN-05-10024.pdf
2. Social Security Administration. (2020). Retirement Benefits. https://www.ssa.gov/benefits/retirement/
3. Internal Revenue Service. (2020). Social Security and Equivalent Railroad Retirement Benefits. https://www.irs.gov/pub/irs-pdf/p915.pdf
4. Perissos Private Wealth. (2020). Social Security Planning. https://www.perissosprivatewealth.com/social-security-planning
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