Many Americans ask themselves several questions when planning for retirement. One of them is: Will the benefits of Social Security be enough to retire comfortably? The simple answer is no. If the structure of the Social Security system is not improved, we could see Social Security being depleted by the year 2034. However, there are a few elements of Social Security benefits that you should be aware of that can assist you in your retirement.
How Social Security Works
Social Security benefits are paid monthly to individuals who are retired and their spouses. These benefits also apply to individuals with complete or partial disability. The amount of benefit you receive is based on the number of years that an individual has worked, which is typically around 35 years.
To apply for these benefits, the minimum age that you can apply is at 62 years of age and the maximum age is 70. Although you may think ‘the sooner the better’, you actually receive larger amounts of benefits the longer you wait. In fact, those who wait to retire until 70 receive 76 percent more income compared to those who retire at 62. Essentially, the waiting game is beneficial.
Social Security Benefits are Taxable
Although you may think you will receive an adequate amount of benefits per month, it is important to remember that Social Security benefits are taxable. As of 2016, individuals who are single taxpayers and receive more than $25,000 of income annually will be taxed for the use of their benefits. Couples who file jointly and receive more than $32,000 will also expect to pay taxes on their benefits. Individuals with complete or partial disabilities typically are tax-free. However, this heavily depends on their living situation and the severity of their disability. It is important to consider the tax on these benefits when determining how Social Security benefits will fit into your retirement plan. Every dime counts!
Although Social Security is not the most reliable source for retirement, it is still useful! Alone it will not be enough, but alongside other strategies, it will be a good source of income. While we provide a brief overview of Social Security benefits, if you would like to learn more, the official Social Security website is a great resource. We also recommend scheduling time with your clients to discuss how Social Security fits within their retirement plan.
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