The Social Security program was designed to provide financial assistance for the millions of adults who are no longer able to work but still have to pay their bills.
If you’re excited to begin retirement but want to make the most of your Social Security benefits, then you should take a look at the three following mistakes that you’ll want to avoid heading into the new year.
1. Being Unaware of Your Full Retirement Age
Typically, Social Security benefits are determined by your lifetime earnings. However, depending on what age you file for retirement benefits, your amount could be affected. If you want to to get the most out of your retirement benefits, you should wait to file until you’re at your full retirement age. Your full retirement age is determined by the year that you were born.
For example, if you were born in 1960, you will be at your full retirement age when you hit 67. If you wait to file for retirement benefits until you’re 67, then you will receive the maximum monthly payments without any penalty. If you decide to file before your full retirement age, you won’t be able to receive the maximum benefits allowed.
Please note that if you were born in 1957, you would be eligible to file for Social Security retirement benefits starting 2019 due to the age 62 being the earliest possible filing age. Also note that if you file for retirement benefits before your full retirement age, your monthly payments will be reduced. We do want to reiterate the importance of understanding the effects of filing for retirement benefits at various ages.
2. Forgetting To Consider Taxes On Your Earnings
While it’s very common to view Social Security as a welfare program, in reality, the benefits paid are funded by you paying into the system and earning sufficient work credits to become eligible for retirement benefits when you’re older. So even though you may sigh when you notice that a piece of your paycheck is sent off to Social Security, it’s important to realize that you’re putting money into a system that will provide you financial assistance when you’re older and no longer expected to work.
The income maximum which Social Security taxes are applied is going up in 2019, meaning if you in a higher-income bracket, you’ll lose a little more money than you did 2018. For 2018, the maximum taxable income for Social Security is $128,400, but in 2019 that amount will go up to $132,900. Those who are earning $4,500 more than they did in 2018 are now subject to Social Security taxes.
If you are employed on a salary, you will be expected to pay a 6.2% tax on the extra $4,500 for a total of $279. If you’re self-employed, however, you’ll need to pay double that amount for a total of $558. Make sure to plan appropriately so you’re not surprised when you see that tax on your bills.
3. Not fighting for a raise
The more income you earn during your lifetime means the more benefit you can collect during retirement. If you’re currently being paid than the average salary at your job, it’s time to talk to your employer and discuss getting a raise.
Don’t rush into the door and slam your fist on the table demanding to get paid more. Instead, do your research and find out how much other people are earning with the same job title as you and compare that to your own salary. If you’re being paid significantly below the average salary for your profession, that’s more than enough reason to point that out to your boss and ask for a raise. Also, create a list of reasons and ways you add value to the company, this could include your specific job skills or by simply being a consistent and hardworking employee. Any of these attributes help your case, take a stand and be vocal about your worth.
The efforts you make next year could affect your retirement benefits from Social Security. If you acknowledge and avoid the mistakes above, then you will be setting yourself up to receive the maximum benefits allowed during retirement while avoiding stinging tax expenses.
Speak To A Social Security Representative
If you wish to learn more on how you can maximize your retirement benefits once you file for Social Security, don’t be afraid to reach out to an official Social Security Administration representative. You can look online to try to find an agent or simply contact your local Social Security office to schedule an appointment.