Are you prepared to live the dream and claim your Social Security retirement benefit? Of course, you are. Social Security benefits are a significant financial milestone. But it is essential to enter this new era of life with a complete understanding of your finances and possibilities.
Because while you may “undo” your Social Security application by withdrawing or halting your payments, it may be more difficult to “undo” actions such as quitting your work or transferring to a retirement community.
By confirming your decision now, you will have more time and mental capacity to explore and appreciate your new lifestyle. Verify that you can answer these six questions to prove that you should submit your Social Security application today.
1. What is your age for complete retirement?
Your full retirement age (FRA) is the age at which you are eligible to receive the maximum Social Security income. As you may know, Social Security replaces around 40% of your income from earnings, and you should be aware that this pricing only applies at FRA. If you file your claim early, your benefits will be reduced.
You may locate your FRA on Social Security statements delivered to you or on your online Social Security account.
2. What are your monthly living costs once you retire?
You won’t know if it’s the correct time to receive Social Security unless you know how much your retirement lifestyle will cost. Likely, your entire retirement income may not support your current lifestyle. And the simplest solution to this dilemma is to delay receiving your retirement payments.
Once you retire, your living expenditures are likely to decrease. Contributions to a retirement plan and payroll taxes are significant reductions, which can be somewhat countered by rising healthcare and recreation costs.
3. How much will you earn from additional sources?
To obtain a thorough financial picture of your retirement, you must assess your pensions, annuities, and savings.
Pensions and annuities are simple since they frequently pay a fixed sum. Estimating your savings income is somewhat more challenging. If your retirement assets are in a tax-advantaged plan such as a 401(k), you may estimate your yearly income at 4% of your account amount. At this distribution rate, your money should last several decades.
Remember that you will be taxed on 401(k) and IRA payouts. Ensure that this is included in your budget.
4. I have no plans to retire. Do I need a retirement account today?
Yes, and I will explain why. What is your projected reward if you file a claim immediately?
Find your projected Social Security benefit on Social Security statements delivered to you or in your Social Security account online. Add the estimate to your other sources of income, then compare the sum to your monthly living expenditures.
You have choices if your overall retirement income does not cover your living expenses. You can scale back or continue working part-time. You can also delay Social Security to get a larger payment in the future. But before you make any major decisions, please answer the following question.
5. Is your employment file complete?
The length of your work history determines how much you’ll get from Social Security. If there are inaccuracies or gaps in your employment history, your benefit might be unjustly reduced.
Verify the correctness of your postal Social Security statement and your online record on my Social Security website. Gather the necessary paperwork to fix omissions and errors and contact your local Social Security office.
6. How might waiting affect your benefit?
Your benefit will increase if you submit your claim later. Through your Social Security account, you may estimate the increase.
Delaying your benefits, however, comes with a cost. You forego current revenue in exchange for increased future income, which might be a good or poor bargain.
It makes more sense to hold out for a bigger benefit if you are in excellent health, have the opportunity to continue working, and plan to live far into your golden years. Waiting to collect is less desirable if you are in bad health or need the money immediately.