Man, what an Olympics this year. Some impressive wins (some even surprising).
It’s been a nice break from the political ad onslaught, though. Watching Katie Ledecky win her fourth gold medal in swimming is preferable to another ad bashing an opposing candidate.
But, as it is an election year, the thing that I’m keeping in front of you today is that things on the tax front have the potential to change when new leaders are at the helm. Could the IRS funding that came from Biden’s American Rescue Plan be in jeopardy if another party takes over? Possibly.
Also on the chopping block are the provisions from the Tax Cuts and Jobs Act, which are set to expire in 2025. I’ve discussed those before and will continue to keep you updated with Congress’s moves on that front (which will be less as we approach November).
Regardless of who is calling the shots on Capitol Hill, the IRS will continue to operate under its normal operating regulations: processing returns, auditing individuals and businesses that trigger the system, and improving internal systems for taxpayer benefit. What I, as the tax person in my Columbia, SC clients’ corner, encourage them to stay focused on is doing their part to meet the IRS’s requirements. I’d be happy to do the same for you if you’re looking for someone.
Today, though, what I want to discuss has to do with helping you make the right moves for your retirement years, specifically with regard to maximizing your Social Security benefits. Something you’ll need to prioritize is careful planning and getting some understanding of how the system works.
I’ve got thoughts on how you can get the most out of things.
Three Ways Columbia, SC Taxpayers Can Maximize Social Security Benefits Now
“Old age is always fifteen years older than I am.” – Oliver Wendell Holmes
To start figuring out how to maximize social security benefits you first must know that you have to pay into the system for at least 10 years. If you worked almost any job for the past ten years of your life, you’re probably good on that point.
As far as calculating benefits, the government bases that on your 35 best-earning years. (Note: The Feds adjust this primary insurance amount (PIA) for inflation to reflect the current value of your earnings.)
Wait until you reach full retirement age (FRA)
The biggest and most crucial consideration for maximizing your Social Security benefits is your full retirement age (FRA). The FRA varies depending on your birth year—it’s 65 for those born in 1937 or earlier and gradually increases to 67 for those born in 1960 or later.
If you start taking benefits at age 62, the earliest possible age, your benefits will be significantly reduced. You could lose nearly a third of the monthly benefit amount you would receive if you waited until your FRA.
If you’re 65 and you have had 33 straight years of making great cash and know it will continue, try to hang in there for another two years. It’ll raise your monthly advantage.
Hold on… there’s more (I mean that literally).
Delaying benefits past your FRA can maximize social security benefits by up to 8 percent per year until age 70, thanks to delayed retirement credits. These are your delayed retirement credit ratings, and they’re gold for your gold years.
Social Security benefits are adjusted annually for inflation through the cost-of-living adjustment (COLA). This automatic increase helps your benefits keep pace with rising living costs. For 2024, the SSA doled out a 3.2 percent increase to adjust for inflation.
Suppose your family history or your present health are making the “take the money now” option more appealing? That’s not uncommon. If you do decide to maximize social security benefits early but then have filer’s remorse, you’ll have 12 months to cancel and repay your benefits so you can start over at a later date.
But, if you can, wait to claim.
Working after you claim SS benefits
Want to continue working after you’ve claimed your social security benefits?
A lot of people are in that same place these days given the cost of things. And they’ve done it while receiving their SS benefits. The thing to keep in mind here is your FRA.
If you claim benefits before your FRA and continue working, your benefits may be reduced based on your earnings. Specifically, you’ll lose one dollar in benefits for every two or three dollars earned over a certain threshold. For 2024, the exempt amount for those under FRA is 22,320, and for those reaching FRA, it is 59,320.
Once you reach your FRA, you can earn as much as you like without any reduction in benefits. Any benefits lost to the earnings test will be recalculated which will help you maximize Social Security benefits.
Love and Social Security
Besides timing, a really easy way to maximize your social security benefits is through your spouse.
Leveraging spousal benefits can significantly increase your household’s total Social Security income. If you’ve reached your FRA, you can receive up to 50 percent of your spouse’s benefit amount. There are conditions:
- Your spouse must have claimed their benefits for you to receive spousal benefits.
- Your benefit depends on both your and your spouse’s age and work history.
- Divorced individuals may be eligible if the marriage lasted at least 10 years.
Widows and widowers can receive up to 100 percent of their deceased spouse’s benefits starting at age 60 (50 if disabled), provided they were married for at least nine months and haven’t remarried too soon.
There are other ways to play spousal and survivor benefits – including claiming spousal benefits while delaying your own or receiving benefits if you’re caring for a child. You can get a general idea of what your spouse is worth here (at least in terms of Social Security…).
Social Security can be complex, but with the right approach, you can maximize social security benefits. I’ve talked plenty of Richland County people through this. If you want to delve into the best strategies for your situation, especially as it impacts your taxes for the year, give us a buzz:
Hang in there,
Akuathayre Snell