Are you one of those people who shrug off the thought of Social Security because retirement seems light-years away? Think again. Planning for your Social Security benefits isn’t just a task for the golden years—it’s something you should be doing now. Let’s dive into why.
Your Social Security Account
First things first, if you haven’t already, head over to www.ssa.gov and create an account. This is your gateway to understanding your Social Security benefits. Once logged in, take a peek at your earnings record. It’s crucial to ensure its accuracy, as mistakes can happen. For instance, if you’ve recently tied the knot or gone through a divorce, and your name change hasn’t been updated with Social Security, your earnings might not be properly recorded. To fix this, submit relevant documents like W-2s or tax returns. Remember, the devil’s in the details—especially when it comes to your hard-earned money. If something seems off, don’t hesitate to reach out to the Social Security Administration.
Once you’ve set up your online Social Security account, encourage your spouse to set up their account too. Be sure to print out both of your benefit statements for your records and update them annually. It’s not just about keeping tabs on your own benefits; it’s about being prepared for any scenario. You or your dependents may be eligible for spousal or survivor benefits from your partner (or possibly even an ex-spouse) down the road, and having all the information at your fingertips will make navigating those situations much easier.
Let’s Talk Numbers
For many people, Social Security benefits are the bedrock of their retirement income, providing a steady, inflation-adjusted stream. Head over to the Social Security website for a personalized benefit estimate based on various claiming ages. However, tread carefully—these estimates assume your income will remain constant until you claim benefits. As we know, life rarely works out that way.
Luckily, the website lets you tweak future earnings to see the impact on your benefits. Simply change the “average future salary amount” to your desired amount. Trust me; it’s worth exploring. I did it myself and saw a whopping 25% reduction in benefits just by retiring a bit earlier.
Special Considerations
If you’re entitled to a pension from a job not covered by Social Security, there might be provisions that affect your benefits. This is especially common for, but not limited to, teachers, police officers and firefighters in states like Ohio, Massachusetts, California and Louisiana. Workers in this situation may be subject to special provisions that can reduce or eliminate their Social Security benefits. Don’t overlook these nuances; they could make a big difference in your retirement planning.
Now, brace yourself for deductions. In 2024 Medicare premiums will start at $174/month, with some high-income individuals paying closer to $600/month. And don’t forget about federal and state taxes, which can take another bite out of your income. Many people will need to include their Social Security benefit as taxable income at the federal level and eleven states also tax benefits at the state level.
Final Thoughts
Social Security estimates that benefits replace approximately 40% of a worker’s income, but this replacement ratio is significantly lower for higher earning individuals. Sure, retirement might seem far off, but starting early gives you a leg up on closing any gaps between your expected benefits and your desired lifestyle. Bottom line, understanding your expected Social Security benefits is the cornerstone of a solid retirement plan.
Ready to take the next step? Reach out to our team. ProVise can help you craft a retirement plan tailored to your goals, ensuring you’re on track for the retirement of your dreams. After all, it’s never too early—or too late—to start planning for the future you want.
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