Three Key Questions to Answer Before Taking Social Security

Submitted by JMB Financial Managers on October 9th, 2023

Social Security retirement benefits are often a major source of income for most Americans during retirement, so before you begin taking it, you should consider three important questions:

When Should I File for Benefits?
Should I Collect and Continue to Work?
How Can I Get the Maximum Benefit?

The answers may affect whether or not you make the most of this opportunity.

1. When Should I File For Benefits?

You have the choice of:

Starting benefits at age 62,
Claiming them at your full retirement age, or
Delaying payments until age 70.

If you claim early, you can expect to receive monthly benefits that will be lower than what you would have earned at full retirement.

If you start taking Social Security payments at full retirement age, you'll receive your full retirement benefits from the Social Security system.

If you wait until age 70 to begin, you can expect to receive an even higher monthly benefit compared to beginning payments at an earlier age due to delayed retirement credits.

The decision of when to begin taking benefits may hinge on whether you need the income now or can wait, whether you or your spouse will be eligible for spousal benefits and which of you is the higher-earning spouse, and how you think your life will compare to the average life expectancy.

2. Should I Collect and Continue to Work?

Remaining in the workforce provides income and personal satisfaction. It might even increase your Social Security benefits.

However, if you begin taking benefits prior to your full retirement age and continue to work, you will be penalized. Your benefits will be reduced by $1 for every $2 in earnings above the prevailing annual limit, according to the Social Security Administration. ($21,240 in 2023).

Additionally, if you work during the year in which you attain full retirement age, your benefits will be reduced by $1 for every $3 in earnings over a different annual limit ($56,520 in 2023) until the month you reach full retirement age.

The good news is that, after you reach your full retirement age, your earned income no longer reduces benefit payments.¹

3. How Can I Get the Maximum Benefit?

The easiest way to maximize your monthly Social Security income is to simply wait until you turn age 70 before receiving payments. Waiting for retirement age will provide the maximum Social Security retirement benefit, while not waiting can actually result in a permanent benefit reduction for the rest of your life, as mentioned previously.

Other Factors that Can Affect Your Social Security Benefit Amount

Paying for Healthcare

Once you reach age 65 in the United States, you become eligible for Medicare (Parts A & B). If you sign up for Medicare Part B, the cost will be taken out of your monthly Social Security benefit amount, so make sure to include that reduction in your retirement planning.¹

Withholding Taxes

If your combined income (50% of your benefit amount plus any other earned income) exceeds $25,000 per year (individuals) or $32,000 per year (filing jointly), you might be required to pay federal income taxes on your Social Security benefit payments. You can choose to directly pay the IRS or have taxes withheld from your benefit payments.¹

Include Social Security Benefits in Your Retirement Planning

A financial advisor can play a significant role in helping you make the best decision for your retirement, including deciding on the best time to file for Social Security benefits. Here at JMB Financial Managers, we help business owners, real estate professionals, independent contractors, and people just like you plan for the retirement they want.

1 - SSA.gov, 2023

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

About the Author

Jack Brkich III, is the president and founder of JMB Financial Managers. A CERTIFIED FINANCIAL PLANNER^TM, Jack is a trusted advisor and resource for business owners, individuals, and families. His advice about wealth creation and preservation techniques have appeared in publications including The Los Angeles Times, NASDAQ, Investopedia, and The Wall Street Journal. To learn more visit https://www.jmbfinmgrs.com/.

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