Claiming Social Security
When should you claim social security?
As we all know, the stock market can be volatile thereby having a negative impact on your income and investments in retirement. This is why it’s essential to have a solid foundation to build upon to help ensure you have a solid retirement income plan. That foundation is your social security benefits. Regardless if social security will or will not be your primary source of income in retirement, if you take your benefits without exploring the different opportunities available to you, you may be giving up income during retirement that is rightly yours.
Are you on your way to your ideal retirement?
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Social Security is an important component in the retirement plan of almost every American. Are you on your way to a secure, satisfying retirement?
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At Barber Financial Group, our integrated wealth management services are working together for you.
Typically, one would hire 5 different companies: 1. Financial Planner 2. Accountant 3. Insurance Agent 4. Estate Attorney 5. Social Security Consultant.
At Barber Financial, you can replace 5 relationships with 1.
Our integrated team of professionals saves you time, energy, and hassle by working together to meet your most significant and most important financial challenges — no need to manage 5 different relationships. We’ve got you covered.
Getting the Most of
Your Social Security
The claiming strategy for you and your family.
If you’re looking for someone who specializes in social security, the advisors at Barber Financial Group will help take you through different social security scenarios and help you find the best claiming strategy for you and your family. It is important to find someone who will look at your full retirement picture and not just the age in which you can start claiming.
What the SSA
Can’t Tell You
What’s best for you.
Once you near retirement age, you may start to receive letters from the Social Security Administration or even unsolicited advice from your friends and family that it’s time to claim your social security in Kansas City. However, what neither of them can tell you is if that is the best strategy for your personal situation.
An unbiased, educated recommendation.
The agents at the SSA are not allowed to offer advice and are limited to telling you only when your benefit will begin and the monthly amount. Additionally, the 8% yearly growth of your social security until you reach the age of 70 1/2 may be worth the wait to begin taking benefits.
The right time to withdraw.
The critical thing to remember is this when it comes to your social security benefits; you may have options and the difference between the best and worst time to start taking your social security check could mean more or less money paid to you in retirement.
Frequently asked questions.
A very common question we are asked at Barber Financial Group is if Social Security is tax-free. The quick answer is: If the only income you have is Social Security you will not pay any taxes on your Social Security. However, If you have other sources of income you could be paying taxes on as much as 85% of your Social Security.
Before we explain how your Social Security is taxed, you must first understand what “Provisional Income” is. Provisional income is used by the IRS to determine if you’ll be paying taxes on your benefit or not. It is calculated by taking 50% of your combined Social Security payments and adding to that any other source of taxable income plus any tax-free income from municipal bonds.
Here’s how it works.
During the Reagan Administration, the laws were changed so that a married couple filing a joint tax return, who had over $32,000 of provisional income, would pay taxes on up to 50% of their Social Security.
During the Clinton administration that law was expanded so that married couples filing a joint tax return with over $44,000 of provisional income could pay taxes on as much as 85% of their Social Security benefits.
Many techniques and planning strategies can allow you to have far more income deposited to your checking account than provisional income. These can help mitigate not only taxes on your Social Security but reduce your overall taxes throughout your retirement.
It is crucial that you discuss your Social Security benefits and how those relate to your overall retirement and tax plan with a trusted financial advisor. At Barber Financial Group we don’t just look at one segment of your financial program, we look at the entire picture to make sure you’re getting the most out of what you worked hard for your whole life.
Are you interested in more information? Make sure to check out our Education Center for videos, audiobooks, and whitepapers on Social Security, or if you’d like to schedule an appointment with one of our advisors, click the button below.
While there are many strategies that may increase the amount of your Social Security, it is critical to understand how Social Security fits into your overall retirement plan. For example, does it work with your tax strategy? Just because you find a way that Social Security can be maximized does not mean that that will automatically be the right answer for your unique situation.
Social Security is a very complex system. Social Security was formed initially to allow older workers to exit the workforce without the risk of running out of money in retirement while allowing room for younger workers to come into the workforce.
When Social Security was originally formed the average life expectancy was 62 years old. At the same time, you could not claim Social Security until you turned 65. Due to advances in medical technology, we are now living longer than ever before, and it’s crucial that you understand how to get the most out of your Social Security.
Below are just a couple of ways in which a person can maximize their Social Security benefit:
Today a person can take Social Security as young as age 62, but in doing so, you will receive a 25% permanent reduction from your benefits. Today, full retirement age is age 66. This is the point at which your benefits are 100% of what you are entitled to. However, between the age of 66 and 70, you can earn delayed credits for Social Security income in the amount of 8% per year. This means that you can experience a 32% increase above your full benefits by waiting until age 70 to claim your Social Security benefit.
Another strategy that is still available is called a restricted application. The restricted application allows a person to file for their spousal benefits at the age of 66 and receive 50% of their spouses benefit while at the same time allowing your benefit to continue to earn the 8% delayed credit.
While many other strategies may increase the amount of your Social Security, it is critical to understand how Social Security fits into your overall retirement plan. For example, does it work with your tax strategy? Just because you find a way that Social Security can be maximized does not mean that that will automatically be the right answer for your unique situation.
Since the signing of the Social Security Act by President Franklin D Roosevelt almost 82 years ago, Social Security has become one of the most popular federal programs that have expanded and changed over the years. (The original document was a mere 29 pages while the current law is almost 2,600 pages long.) It’s hard to predict what or when future changes to Social Security will occur, so it’s important to make sure this important retirement program is used correctly within your plan to maximize your benefits.
The answer as to when and how a person should claim their Social Security is a very personal question. It depends on what other sources of income you have, your life expectancy, your spouse’s life expectancy and your overall tax situation. We’ve seen many situations where it makes sense to begin taking Social Security as soon as possible. We’ve also seen other situations where delaying it as long as possible is the best strategy. There are no simple one-size-fits-all answer; only a thorough analysis of your entire financial situation can give you answers about when and how to claim your Social Security.
Many people believe that the date that they should claim Social Security is synonymous with the day that they retire. However, nothing could be further from the truth.
Your Social Security claiming age date is based on law. The earliest claiming age for Social Security is 62. You will receive a reduced benefit of 75% of your full retirement benefits if you claim at 62. If you are claiming spousal benefits at the age of 62, you will only receive 50% of the reduced amount of your spouse’s benefits. Once you make this decision, you need to remember that it is a permanent commitment unless you make a change within 12 months. To help determine the optimal time to begin claiming your Social Security benefits, it is imperative that you complete a comprehensive financial plan that takes into consideration all of your financial resources, your overall tax picture, your distribution strategy, your longevity, your risk management plan, and your legacy goals. Do not make Social Security decisions in a vacuum.
It’s important to note that what you consider as your “retirement age,” or the age in which you leave the workforce is entirely up to you. However, it is also imperative to remember that leaving the workforce early can directly affect your Social Security benefits. Whether you choose to retire early, on time or continue to work after your retirement age is up to you, but it’s crucial that you discuss this plan with a qualified financial advisor.