9 life-saving tricks about social security they haven’t told you yet

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Social Security is a valuable program that ensures retirees in their golden years have some income they can count on. However, many Americans do not understand how it works.

To learn: Understand the basics of Social Security

Social Security Plan: When the first COLA checks will arrive in January 2022

Just over a third of prospective retirees (aged 55-65) failed and another 18% received a B on a basic knowledge quiz about Social Security pension benefits through MassMutual. Only 3% received an A+ by correctly answering all 12 true/false statements.

Knowing the ins and outs of Social Security can help you take full advantage and avoid leaving money on the table. Here are nine facts about Social Security you might not know.

See: All states that do not tax Social Security

Social Security is not going away

It’s true that the reserves of the Social Security Trust fund will be depleted by 2035, and many Americans fear there will be no more benefits by the time they retire.

“This fear causes many people — most likely to their detriment — to start collecting benefits as soon as they are able so that they can receive them while they last,” said Taylor Jessee, CPA, CFP and leader of the Financial Planning Pro Taylor Hoffman Wealth Management.

However, Social Security is largely funded by payroll taxes, which will continue to be levied for the foreseeable future.

“I warn today’s retirees that Social Security isn’t likely to go away anytime soon,” Jessee added.

Social security is not enough to live in retirement

Most people cannot live on Social Security. On average, it will make up 30% to 40% of your pre-retirement income.

“Nonetheless, Social Security benefits are still valuable, so you should do what you can to maximize them,” said Jackie King, financial advisor at Edward Jones.

The more you invest in a retirement plan like a 401(k) or IRA, the more flexibility you gain in managing your retirement costs because you have more sources of income to combine with Social Security.

“So try to contribute as much as you can to those plans,” King said.

When Social Security expires: What the program will look like in 2035

Benefits are based on your highest 35 years of earnings

Concerned that several years at a lower salary will negatively impact your Social Security benefits?

The good news is that the formula used to calculate your benefit, according to King, is based on your highest-earning 35 years and the age at which you start Social Security. If you want to know how much you are likely to get, she said you can Register Receive an annual statement from the Social Security Administration that includes an updated estimate.

Your personal situation is more important than your age

The longer you wait to claim Social Security, the more money you’ll get.

You can take advantage of them at a reduced rate from the age of 62. If you wait until you reach your full retirement age, you are entitled to your full benefit. Waiting until age 70 means you get 132% of your full potential.

But waiting as long as possible to claim your benefits isn’t always the best move.

“Your needs come first,” says Stephan Baldwin, founder of Assisted Living Center.

For example, he said, if your spouse has died, it may make more sense to apply for survivor’s benefits than to wait for full benefits. So be sure to review all of your options.

Are you doomed to work forever? What you can do if your social security is not sufficient

You can claim your ex’s benefits

Even if you’re no longer married, you may be able to claim spousal benefits, according to Baldwin. To qualify, your marriage must have lasted more than 10 years, you must be at least 62 years old and you cannot be remarried. You can also claim 100% of the survivor’s benefit if your ex-spouse died, Baldwin noted.

You get the greater benefit if your spouse dies

If both spouses in a marriage receive Social Security benefits, the reduced benefit lapses if one person dies. It doesn’t matter who dies first – the surviving spouse receives the greater of the two benefits.

“So couples should focus on increasing the higher performance,” said Jeremy Keil, a retirement-focused financial planner at Keil financial partner and host the retirement revealed blogs and podcasts. “It’s the one who stays around the longest and is there to help the widow (he).”

Some of your benefits may be withheld

If you claim your benefits before you reach full retirement age, are still working, and earn more than the annual income limit, you may have some of your Social Security benefits withheld.

The cap is $19,560 for 2022, and you would lose $1 in benefits for every $2 in earnings over the cap.

But you don’t really lose the benefit. “You don’t get it while you’re under full retirement age; but once you reach that age, Social Security will recalculate and credit you with those dollars,” Kell explained.

More on this: Everything you need to know about collecting Social Security while you’re still working

You can reverse a decision about an entitlement to Social Security benefits

If you’ve decided to apply for your benefits and then realize you should have waited, the Social Security Administration allows you to withdraw your application for a one-time retry.

“There are a multitude of reasons why someone regrets making a decision to start Social Security,” said Jordan Kahn, CFA and chief investment officer for HCR Wealth Advisor.

For example, you could opt for a part-time job and no longer need the additional income. Or maybe you didn’t realize how much more money you could get if you wait a few more years.

“If a person makes that decision within 12 months of submitting their initial claim, they can stop receiving benefits and continue as if they never claimed them,” Khan said.

However, you would have to pay back the benefits received during this period.

You may have to pay taxes on Social Security benefits

Many Americans pay taxes on their Social Security benefits. The exact amount you have to pay depends on your total income.

“It doesn’t take a lot of income for your benefits to be taxed,” Kahn said.

If you are a single filer and earn between $25,000 and $34,000, you may have to pay income tax on up to 50% of your benefits. If you earn more than $34,000, up to 85% of your benefits may be taxable. If you and your spouse have a combined income of between $32,000 and $44,000, you may have to pay income tax on up to 50% of your benefits. If your combined income is more than $44,000, up to 85% of your benefits may be taxable.

In addition to paying federal income tax on your benefits, Kahn noted that 12 states also collect income tax on Social Security benefits: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia.

If you’re concerned about your tax bill in retirement, it’s a good idea to speak to a professional who can help you identify ways to reduce your taxable income.

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This article originally appeared on GOBankingRates.com: 9 things most retirees don’t know about Social Security

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