Even before you reach your retirement age, you know that social security is a must-have once you hit the right age. It is the cornerstone of retirement, and understanding how it works is vital. Unfortunately, many misconceptions surround social security, which gets many seniors confused. This article sheds light on three facts about social security benefits that you didn’t know.
Taxes Are a Chore
While many people understand that social security funds are taxable, they don’t know the essence of this. Well, depending on the size of your checks and where you live, you will undergo federal taxes and sometimes be subjected to state taxes as well. If your income equals half the benefits amount plus non-taxable income and taxable income, your social security benefits will be taxable. The good news is that the taxes will never go beyond 85% of your benefits, and you won’t get taxed if you rely 100% on the social security benefits. It is important to get a financial advisor to help you create a solid financial plan that will help with the taxes.
More People Benefit Than You Think
Social security funds are not only meant for retirees, as many people believe. Several people benefit from these funds, including the widows and widowers, disabled, and children of the deceased. Sometimes, the dependent parents may also benefit from these funds. The beneficiaries are determined by how they are related to the worker and the significance of the income on the lives of the dependent. Sometimes the benefits even extend to disabled workers. Depending on how disability is defined, the benefits could extend to the whole family.
You Don’t Need to Retire to Receive the Benefits
If you want to, you can start receiving your retirement benefits while you’re still working. You can file to start receiving your social security benefits before you attain your full retirement age. This benefit, however, comes with some reductions over a specified annual limit. The reductions can be between $1.00 applicable for every $2.00 earnings above your annual limit. However, if you have attained your full retirement age, but you keep working, you will receive your total benefits without any reductions.
Understanding how social security benefits work is crucial for you to have a strategic plan ahead for your retirement. Consider taking some measures that maximize the benefits so that this income can be a good supplement for your income after you retire.