What Do I Need before Social Security?

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It’s never too early to start planning for retirement. Even if you don’t plan to have a traditional retirement, it’s a good idea to consider how you’ll manage income as you age.

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As you create your own Social Security strategy, Money Talks News’s recent article entitled “7 Things You Should Do Before Claiming Social Security” provides a list of things you should do prior to applying for benefits.

  1. Create a mySocialSecurity account. Go to SSA.gov to create an account. You can use your mySocialSecurity account to get personalized estimates of future benefits, look at your latest Social Security statement and review your earnings history.
  2. Make sure your earnings are accurate. Your Social Security statement should have a record of your annual income. Check it for accuracy before claiming benefits. If there’s an error in your earnings record, your monthly payment could be impacted. If you find a mistake, follow the SSA’s directions for correcting it.
  3. Know your full retirement age. Your full retirement age (FRA) is the age at which you’re eligible to receive your “full” Social Security retirement benefit amount. It’s based on the year you were born. You can generally start taking Social Security at 62, but you’ll get less than your full benefit if you claim before your FRA. However, if you delay until after your FRA to receive your benefits, you’ll see a bigger monthly payment up until age 70.
  4. Calculate your retirement income streams. Understanding your FRA and how it relates to your total income in retirement is important. You should also consider the tax issues and what your required minimum distributions (RMDs) might look like from a 401(k) or IRA.
  5. Figure your probable retirement expenses. Estimate how much you’ll spend in retirement and create a budget, breaking down your needs into monthly costs. Consider your lifestyle preferences and potential health care needs. When you know how much your monthly expenses will be in retirement, compare them with your expected retirement income, which will give you a better idea of the amount of Social Security income you will want each month and the age when you should first claim benefits.
  6. Remember your spouse. When one spouse dies, the other may be eligible to receive a survivor’s benefit, equal to as much as 100% of the deceased spouse’s Social Security benefit. Therefore, a breadwinner may want to delay claiming Social Security to increase their benefit. This will add to their spouse’s survivors benefit, if the breadwinner dies first.
  7. Be aware of over-earning. Be realistic about whether you think you’ll work during retirement. If you decide to go back to work full time or take up consulting before you reach full retirement age, your Social Security benefit could be temporarily reduced.

Reference: Money Talks News (Dec. 28, 2020) “7 Things You Should Do Before Claiming Social Security”

Suggested Key Terms: Elder Law Attorney, Social Security, Retirement Planning, Financial Planning, Tax Planning, Required Minimum Distributions (RMDs), 401(k), IRA