Getting ready for retirement? Before you can cross that bridge, you’ll need to cross some important items off your to-do list. But thanks to our work together, you might be more prepared than you think! This handy checklist of ten crucial steps can help you visualize how far you’ve come.
You’re 0 steps closer to retirement readiness.
To measure your progress toward retirement preparation, check off your “Done” items from the list below.
Retirement Budget
Understand what your income will be, and how you can confidently spend the money you have accumulated for retirement.
Emergency Savings
Prepare for emergencies by saving at least 3 months’ living expenses, and have that money easily available to you.
Tax Strategy
Have a sound tax strategy to guide you through the process of spending money from both taxable and tax-deferred accounts.
Lifestyle & Location
Consider where you’ll live, both short- and long-term. Have a plan for funding a move and understand the timing involved.
401k Strategy
Have a strategy for your 401(k) plan and determine the best time for you to access the money, based on your goals.1
Bucket List
Write down your personal goals for your retirement years. Explore your dreams, priorities and values.
Extended Care
Make arrangements in the event that you or a loved one encounters a health issue requiring full-time care.
Estate Strategy
Develop an estate approach that includes how you want your assets to be allocated, and who will handle your estate.
Health Insurance
Understand your options with Medicare and define a strategy for covering health care expenses for the long haul.
Social Security Strategy
Have a sound tax strategy to guide you through the process of spending money from both taxable and tax-deferred accounts.
NOT QUITE READY?
If you’re not as prepared for retirement as you’d like to be, just reach out. Together, we can fine-tune these strategies so you can finish your checklist and get started on that bucket list.
1. Distributions from 401(k) plans and most other employer-sponsored retirement plans are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Generally, once you reach age 73, you must begin taking required minimum distributions.
Whether you’re applying for Social Security in the future or currently receiving benefits, there are some important changes to earnings limits, Medicare premiums, and other differences to keep in mind. Ready to learn more? Read on.
Ready for a Cost-of-Living (COLA) increase?
That’s right! Due to an increase in the Consumer Price Index (CPI-W), the Social Security Administration (SSA) has made a 3.2-percent COLA Adjustment.1
What about Tax Caps?
Employees everywhere will be happy to hear that the cap on wages subject to Social Security withholdings has increased to $168,600.1
Any change to earning limits?
If a working individual starts receiving Social Security payments before full retirement age, the Social Security Administration will deduct $1 in benefits for each $2 that person earns above an annual limit. In 2024, the income limit is $22,320.1
During the year in which a worker reaches full retirement age, Social Security benefit reduction falls to $1 in benefits for every $3 in earnings. For 2024, the limit is $59,520 before the month the worker reaches full retirement age.1
Are Medicare Part B Premiums Affected?
Social Security recipients will see a $9.80 increase in Part B premiums. But first-time enrollees and Medicare beneficiaries who earn $206,000 or more in 2024 may pay a higher premium.2
How much do I need to earn for one Social Security “credit”?
For 2024, you’ll need to earn $1,730 to earn one “credit” toward Social Security and Medicare, up from $1,640 in 2023. What remains the same? You can only earn four credits each year, and you must earn at least 40 credits in order to qualify for benefits.3
For many, Social Security may be an important source of income during their “second act.” If changes to Social Security give you pause or make you question if you are making the most of your benefits, a qualified financial professional may be just the person you need to help you realize your retirement strategy’s full potential.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.
Most portfolios are constructed based on an individual’s investment objective, risk tolerance, and time horizon.
Using these inputs and sophisticated portfolio-optimization calculations, most investors can feel confident that they own a well-diversified portfolio, appropriately positioned to pursue their long-term goals.1
However, as a retiree, how you choose to live in retirement may be an additional factor to consider when building your portfolio.
Starting a Business?
Using retirement funds to start a business entails significant risk. If you choose this path, you may want to consider reducing the risk level of your investment portfolio to help compensate for the risk you’re assuming with a new business venture.
Since a new business is unlikely to generate income right away, you may want to construct your portfolio with an income orientation in order to provide you with current income until the business can begin turning a profit.
Traveling for Extended Periods of Time?
There are a number of good reasons to consider using a professional money manager for your retirement savings. Add a new one. If you are considering extended travel that may keep you disconnected from current events (even modern communication), investing in a portfolio of individual securities that requires constant attention may not be an ideal approach. For this lifestyle, professional management may suit your retirement best.2
Rethink Retirement Income?
Market volatility can undermine your retirement-income strategy. While it may come at the expense of some opportunity cost, there are products and strategies that may protect you from drawing down on savings when your portfolio’s value is falling—a major cause of failed income approaches.
1. Diversification and portfolio optimization calculations are approaches to help manage investment risk. They do not eliminate the risk of loss if security prices decline. 2. Keep in mind that the return and principal value of security prices will fluctuate as market conditions change. And securities, when sold, may be worth more or less than their original cost. Past performance does not guarantee future results. Individuals cannot invest directly in an index.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.
Pursuing your retirement dreams is challenging enough without making some common, and very avoidable, mistakes. Here are eight big mistakes to steer clear of, if possible.
No Strategy: Yes, the biggest mistake is having no strategy at all. Without a strategy, you may have no goals, leaving you no way of knowing how you’ll get there—and if you’ve even arrived. Creating a strategy may increase your potential for success, both before and after retirement.
Frequent Trading: Chasing “hot” investments often leads to despair. Create an asset allocation strategy that is properly diversified to reflect your objectives, risk tolerance, and time horizon; then make adjustments based on changes in your personal situation, not due to market ups and downs.1
Not Maximizing Tax-Deferred Savings: Workers have tax-advantaged ways to save for retirement. Not participating in your employer’s 401(k) may be a mistake, especially when you’re passing up free money in the form of employer-matching contributions.2
Prioritizing College Funding over Retirement: Your kids’ college education is important, but you may not want to sacrifice your retirement for it. Remember, you can get loans and grants for college, but you can’t for your retirement.
Overlooking Healthcare Costs: Extended care may be an expense that can undermine your financial strategy for retirement if you don’t prepare for it.
Not Adjusting Your Investment Approach Well Before Retirement: The last thing your retirement portfolio can afford is a sharp fall in stock prices and a sustained bear market at the moment you’re ready to stop working. Consider adjusting your asset allocation in advance of tapping your savings so you’re not selling stocks when prices are depressed.3
Retiring with Too Much Debt: If too much debt is bad when you’re making money, it can be deadly when you’re living in retirement. Consider managing or reducing your debt level before you retire.
It’s Not Only About Money: Above all, a rewarding retirement requires good health, so maintain a healthy diet, exercise regularly, stay socially involved, and remain intellectually active.
1. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost. Asset allocation and diversification are approaches to help manage investment risk. Asset allocation and diversification do not guarantee against investment loss. Past performance does not guarantee future results. 2. Under the SECURE Act, in most circumstances, you must begin taking required minimum distributions from your 401(k) or other defined contribution plan in the year you turn 73. Withdrawals from your 401(k) or other defined contribution plans are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty.” 3. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost. Asset allocation is an approach to help manage investment risk. Asset allocation does not guarantee against investment loss. Past performance does not guarantee future results.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.
Social Security is a critical component of the retirement financial strategy for many Americans, so before you begin taking it, you should consider three important questions. The answers may affect whether you make the most of this retirement income source.
When to Start? You have the choice of 1) starting benefits at age 62, 2) claiming them at your full retirement age, or 3) delaying payments until age 70. If you claim early, you can expect to receive a monthly benefit that will be lower than what you would have earned at full retirement. If you wait until age 70, you can expect to receive an even higher monthly benefit than you would have received if you had begun taking payments at your full retirement age. The decision of when to begin taking benefits may hinge on whether you need the income now or can wait, and whether you think your lifespan will be shorter or longer than the average American.
Should I Continue to Work? Work provides income, personal satisfaction, and may increase your Social Security benefits. However, if you begin taking benefits prior to your full retirement age and continue to work, your benefits will be reduced by $1 for every $2 in earnings above the prevailing annual limit ($21,240 in 2023). If you work during the year in which you attain full retirement age, your benefits will be reduced by $1 for every $3 in earnings over a different annual limit ($56,520 in 2023) until the month you reach full retirement age. After you attain your full retirement age, earned income no longer reduces benefit payments.1
How Can I Maximize My Benefit? The easiest way to maximize your monthly Social Security benefit is to simply wait until you turn age 70 before receiving payments.
1. SSA.gov, 2023
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.
For the casual observer, it sometimes seems that variable annuities are either “terrible” or “wonderful.”
Commentators in the financial media seem to occupy a polarity of opinions we might see in politics. What gets lost when these commentators collide is “the individual.” Unfortunately, the discussion is rarely centered on whether a variable annuity is relevant and useful to you and your set of needs.
Before considering investing in a variable annuity, you may want to make sure that you are exhausting the contribution limits of your 401(k), IRA, or other qualified retirement plan.
Variable annuities are sold by prospectus, which contains detailed information about investment objectives and risks, as well as charges and expenses. You are encouraged to read the prospectus carefully before you invest or send money to buy a variable annuity contract. The prospectus is available from the insurance company or from your financial professional. Variable annuity subaccounts will fluctuate in value based on market conditions, and may be worth more or less than the original amount invested if the annuity is surrendered.
At the end of the day, however, variable annuities are really a value judgment.
Do you value the guarantees and predictable income that annuities can provide?
Are the fees charged worth the price of mitigating the risk fluctuating markets can have on your financial security in retirement?
Only you can be the judge of what constitutes value to you. Leave the punditry on variable annuities to others and focus on whether they make sense for you.
The guarantees of an annuity contract depend on the issuing company’s claims-paying ability. Remember variable annuities have contract limitations, fees, and charges, including account and administrative fees, underlying investment management fees, mortality and expense fees, and charges for optional benefits.
Most annuities have surrender fees that are usually highest if you take out the money in the initial years of the annuity contact. Withdrawals and income payments are taxed as ordinary income. If a withdrawal is made prior to age 59½, a 10% federal income tax penalty may apply (unless an exception applies). Annuities are not guaranteed by the FDIC or any other government agency.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.
The reason withdrawals from a Traditional Individual Retirement Account (IRA) prior to age 59½ are generally subject to a 10% tax penalty is that policymakers wanted to create a disincentive to use these savings for anything other than retirement.1
Yet, policymakers also recognize that life can present more pressing circumstances that require access to these savings. In appreciation of this, the list of withdrawals that may be taken from a Traditional IRA without incurring a 10% early withdrawal penalty has grown over the years.
Penalty-Free Withdrawals
Outlined below are the circumstances under which individuals may withdraw from an IRA prior to age 59½ without a tax penalty. Ordinary income tax, however, generally is due on such distributions.
Death — If you die prior to age 59½, the beneficiary(ies) of your IRA may withdraw the assets without penalty. However, if your beneficiary decides to roll it over into his or her IRA, he or she will forfeit this exception.2,3
Disability — Disability is defined as being unable to engage in any gainful employment because of a mental or physical disability, as determined by a physician.4
Substantially Equal Periodic Payments — You are permitted to take a series of substantially equal periodic payments and avoid the tax penalty, provided they continue until you turn 59½ or for five years, whichever is later. The calculation of such payments is complicated, and individuals should consider speaking with a qualified tax professional.4
Home Purchase — You may take up to $10,000 toward the purchase of your first home. (According to the Internal Revenue Service, you also qualify if you have not owned a home in the last two years). This is a lifetime limit.
Unreimbursed Medical Expenses — This exception covers medical expenses in excess of 7.5% of your adjusted gross income.
Medical Insurance — This permits the unemployed to pay for medical insurance if they meet specific criteria.
Higher Education Expenses — Funds may be used to cover higher education expenses for you, your spouse, children, or grandchildren. Only certain institutions and associated expenses are permitted.
IRS Levy — Funds may be used to pay an IRS levy.
Active Duty Call-Up — Funds may be used by reservists called up after 9/11/01, and whose withdrawals meet the definition of qualified reservist distributions.
1. In most circumstances, once you reach age 73, you must begin taking required minimum distributions from a Traditional Individual Retirement Account (IRA). You may continue to contribute to a Traditional IRA past age 70½ as long as you meet the earned-income requirement. 2. Distributions to a non-spouse beneficiary are generally required to be distributed by the end of the 10th calendar year following the year of the Individual Retirement Account (IRA) owner’s death. The new rule does not require the non-spouse beneficiary to take withdrawals during the 10-year period. But all the money must be withdrawn by the end of the 10th calendar year following the inheritance. A surviving spouse of the IRA owner, disabled or chronically ill individuals, individuals who are not more than 10 years younger than the IRA owner, and child of the IRA owner who has not reached the age of majority may have other minimum distribution requirements. 3. Investopedia.com, March 5, 2022 4. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Federal and state laws and regulations are subject to change, which may have an impact on after-tax investment returns. Please consult legal or tax professionals for specific information regarding your individual situation.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.
One of the common threads of a mobile workforce is that many individuals who leave their job are faced with a decision about what to do with their 401(k) account.¹
Individuals have four choices with the 401(k) account they accrued at a previous employer.2
Choice 1: Leave It with Your Previous Employer
You may choose to do nothing and leave your account in your previous employer’s 401(k) plan. However, if your account balance is under a certain amount, be aware that your ex-employer may elect to distribute the funds to you.
There may be reasons to keep your 401(k) with your previous employer —such as investments that are low cost or have limited availability outside of the plan. Other reasons are to maintain certain creditor protections that are unique to qualified retirement plans, or to retain the ability to borrow from it, if the plan allows for such loans to ex-employees.3
The primary downside is that individuals can become disconnected from the old account and pay less attention to the ongoing management of its investments.
Choice 2: Transfer to Your New Employer’s 401(k) Plan
Provided your current employer’s 401(k) accepts the transfer of assets from a pre-existing 401(k), you may want to consider moving these assets to your new plan.
The primary benefits to transferring are the convenience of consolidating your assets, retaining their strong creditor protections, and keeping them accessible via the plan’s loan feature.
If the new plan has a competitive investment menu, many individuals prefer to transfer their account and make a full break with their former employer.
Choice 3: Roll Over Assets to a Traditional Individual Retirement Account (IRA)
Another choice is to roll assets over into a new or existing traditional IRA. It’s possible that a traditional IRA may provide some investment choices that may not exist in your new 401(k) plan.4
The drawback to this approach may be less creditor protection and the loss of access to these funds via a 401(k) loan feature.
Remember, don’t feel rushed into making a decision. You have time to consider your choices and may want to seek professional guidance to answer any questions you may have.
Choice 4: Cash out the account
The last choice is to simply cash out of the account. However, if you choose to cash out, you may be required to pay ordinary income tax on the balance plus a 10% early withdrawal penalty if you are under age 59½. In addition, employers may hold onto 20% of your account balance to prepay the taxes you’ll owe.
Think carefully before deciding to cash out a retirement plan. Aside from the costs of the early withdrawal penalty, there’s an additional opportunity cost in taking money out of an account that could potentially grow on a tax-deferred basis. For example, taking $10,000 out of a 401(k) instead of rolling over into an account earning an average of 8% in tax-deferred earnings could leave you $100,000 short after 30 years.5
1. In most circumstances, you must begin taking required minimum distributions from your 401(k) or other defined contribution plan in the year you turn 73. Withdrawals from your 401(k) or other defined contribution plans are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty. 2. FINRA.org, 2022 3. A 401(k) loan not paid is deemed a distribution, subject to income taxes and a 10% tax penalty if the account owner is under 59½. If the account owner switches jobs or gets laid off, any outstanding 401(k) loan balance becomes due by the time the person files his or her federal tax return. 4. In most circumstances, once you reach age 73, you must begin taking required minimum distributions from a Traditional Individual Retirement Account (IRA). Withdrawals from Traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. You may continue to contribute to a Traditional IRA past age 70½ as long as you meet the earned-income requirement. 5. This is a hypothetical example used for illustrative purposes only. It is not representative of any specific investment or combination of investments.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.
For most Americans, Social Security has represented nothing more than some unavoidable payroll deduction with the positively cryptic initials of “FICA” and “OASDI” (Federal Insurance Contributions Act and Old Age, Survivors and Disability Insurance). It hinted at a future that seemed both intangible and far away.
Yet, some Americans now sit on the cusp of drawing on the promise that was made with those payments.
As the growing wave of citizens approach retirement, questions and concerns abound. Is Social Security financially healthy? How much will my income benefit be? How do I maximize my benefits for my spouse and myself? When should I begin taking Social Security?
Questions & Elephants
Answering these questions may help you derive the most from your Social Security benefit and potentially enhance your financial security in retirement. Before you can answer these questions, you have to acknowledge the elephant in the room.
The Social Security system has undergone periodic scares over the years that have inevitably led many people to wonder if Social Security will remain financially sound enough to pay the benefits they are owed.
Reasonable Concern
Social Security was created in 1935 during Franklin D. Roosevelt’s first term. It was designed to provide income to older Americans who had little to no means of support. The country was mired in an economic downturn and the need for such support was acute.1
Since its creation, there have been three basic developments that have led to the financial challenges Social Security faces today.
The number of workers paying into the system (which supports current benefit payments) has fallen from just over 8 workers for every retiree in 1955 to 2.8 in 2021. That ratio is expected to fall to 2.3 to 1 by 2038.2,3
A program that began as a dedicated retirement benefit later morphed into income support for disabled workers and surviving family members. These added obligations were not always matched with the necessary payroll deduction levels to financially support these additional objectives.
Retirees are living longer. As might be expected, the march of medical technology and our understanding of healthy behaviors have led to a longer retirement span, potentially placing a greater strain on resources.
Beginning in 2010, tax and other non-interest income no longer fully covered the program’s cost. According to the Social Security Trustees 2022 annual report, this pattern is expected to continue for the next 75 years; the report projects that the trust fund may be exhausted by 2034, absent any changes.4
Social Security’s financial troubles are real, but the prospect of its failure seems remote. There are a number of ways to stabilize the Social Security system, including, but not limited to:
Increase Payroll Taxes: An increase in payroll taxes, depending on the size, could add years of life to the trust fund.
Raise the Retirement Age: This has already been done in past reforms and would save money by paying benefits to future recipients at a later age.
Tax Benefits of Higher Earners: By taxing Social Security income for retirees in higher tax brackets, the tax revenue could be used to lengthen the life of the trust fund.
Modify Inflation Adjustments: Rather than raise benefits in line with the Consumer Price Index (CPI), policymakers might elect to tie future benefit increases to the “chained CPI,” which assumes that individuals move to cheaper alternatives in the face of rising costs. Using the “chained CPI” may make cost of living adjustments less expensive.
Reform is expected to be difficult since it may involve tough choices. But with Social Security playing such a key role for so many retired Americans, lawmakers are expected to come together and find solutions.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.
Social Security can be complicated, and as a result, many individuals don’t have a full understanding of the choices they may have. Here are five facts about Social Security that are important to keep in mind.
1. Social Security Is a Critical Source of Retirement Income
Some have the perception that Social Security is of secondary or even tertiary importance in retirement. But according to a recent report by the Employee Benefits Research Institute, Social Security represents a major source of income for 67% of retirees.1
Keep in mind that Social Security makes annual cost-of-living adjustments (COLAs) based on the Consumer Price Index, and under current laws, pays income for life and the life of your spouse.2
2. You Can Choose When You Take Social Security
You have considerable flexibility regarding when you can begin receiving your benefits. You may begin receiving benefits as early as age 62; however, your benefits will be reduced at a rate of about one-half of 1% for each month you begin taking Social Security before your full retirement age.3
The full retirement age is 67 if you were born in 1960 or later. If you were born before 1960, your retirement age will be reduced depending on the year in which you were born.
You may choose to delay receiving benefits until after reaching your full retirement age; in which case, your benefits are scheduled to increase by 8% annually. This increase under current law will be automatically added each month from the moment you reach full retirement age until you start taking benefits or reach age 70 – the age at which these delayed retirement credits stop accruing. Plus, your benefit also will increase by any cost-of-living adjustments applied to benefit payment levels during that time.4
If you intend to continue working, you may still receive the full benefit for which you are eligible. Indeed, working beyond full retirement age can increase your benefits. However, your benefits will be reduced if your earnings exceed certain limits. If you work and start receiving benefits before full retirement age, your benefits will be reduced by $1 for every $2 in earnings above the prevailing annual limit ($22,320 in 2024).5
If you continue to work during the year in which you attain full retirement age, your benefits will be reduced by $1 for every $3 in earnings over a different annual limit ($59,520 in 2024) until the month you reach full retirement age.5
Once you have attained full retirement age, you can keep working, and your benefits under current law will not be reduced regardless of how much you earn.5
As you can see, the decision of when to begin taking Social Security is a critical one.
3. Social Security May Be Taxable
Depending on your income level, your Social Security benefit may be subject to taxation. The chart below illustrates how your combined income (adjusted gross income + your nontaxable interest + one-half of your Social Security benefit) can impact whether your Social Security retirement benefit is subject to taxation.6
Will Your Social Security Benefits Be Subject to Federal Income Taxes?
50% of BenefitSubject to Taxation
85% of BenefitSubject to Taxation
Individual Filers
Combined Income of$25,000 to $34,000
Combined IncomeGreater than $34,000
Joint Filers
Combined Income of$32,000 to $44,000
Combined IncomeGreater than $44,000
This potential income tax exposure may have substantial implications for whether you choose to work during retirement, how your assets are invested, and the timing of withdrawals from other retirement accounts.7,8
For instance, a withdrawal from a traditional IRA may lift your income beyond the thresholds described above, subjecting a higher proportion of your Social Security to income tax.7,8
The same is true of investment earnings in non-retirement savings. Retirees who have investment earnings in excess of their current spending needs may be subjecting their Social Security income to taxation. Shifting a portion of those assets to a tax-deferred instrument may be one way to manage taxation on your Social Security benefit.9
4. Social Security Can Be a Family Benefit
When you start receiving Social Security, other family members may also be eligible for payments. A spouse (even if they did not have earned income) qualifies for benefits if they are age 62 or older – or at any age if they are caring for your child. (The child must be younger than 16 or disabled.)
Benefits may also be paid to your unmarried children if they are younger than 18, between 18 and 19 and enrolled in a secondary school as a full-time student, or age 18 or older and severely disabled.
Each family member may be eligible for a monthly benefit that is up to half of your retirement (or disability) benefit amount. There is a family limit, which varies, but is generally between 150% to 180% of your retirement (or disability) benefit.10
Should you die, your family may be eligible for benefits based on your work record.10
Family members who qualify for benefits include:
A widow or widower
age 60 or older;
age 50 and older if disabled; or
any age if they are caring for your child who is younger than 16 or disabled and entitled to Social Security benefits on your record.
Unmarried children can receive benefits if they are:
under 18 years of age;
between 18 and 19 and are full-time students in a secondary school; or
age 18 or older and severely disabled (the disability must have started before age 22).
Your survivors receive a percentage of your basic Social Security benefit – usually in the range of 75% to 100% for each member. However, the limit paid to each family is about 150% to 180% of your benefit rate.10
5. A Divorced Spouse May Be Eligible for Benefits
If you are divorced, you may qualify for Social Security benefits based on your ex-spouse’s work record. To be eligible for benefits, your ex-spouse must have reached the age at which they are eligible to begin receiving benefits (although they do not necessarily need to be receiving them).10
To qualify, you need to:
have been married to your ex-spouse for at least 10 years;
have been divorced for two years or longer;
be at least 62 years old;
be unmarried; and
not be entitled to a higher Social Security benefit based on your own work history.
If your former spouse is deceased, you may still receive benefits as a surviving divorced spouse (irrespective of the age they died), assuming that your ex-spouse was entitled to Social Security benefits, your marriage was at least 10 years, you are at least 60 years old, and you are not entitled to a higher benefit amount based on your own work history. If you remarry before the age of 60, you will lose the ability to receive a survivor benefit from your deceased ex-spouse.10
If your former spouse is living, the maximum amount that you are eligible to receive is 50% of what your former spouse is due at full retirement age. To receive the maximum benefit, you will need to wait until you have reached your own full retirement age.10
Your benefits are unaffected should your former spouse elect to take Social Security before reaching full retirement age or if your ex-spouse starts a new family.10
1. EBRI.org, 2023 2. SSA.gov, 2023 3. SSA.gov, 2023 4. SSA.gov, 2023 5. SSA.gov, 2023 6. SSA.gov, 2023 7. In most circumstances, once you reach age 73, you must begin taking required minimum distributions from a Traditional Individual Retirement Account (IRA). You may continue to make tax-deductible contributions to a Traditional IRA past age 70½ as long as you meet the earned-income requirement. 8. Once you reach age 73 you must begin taking required minimum distributions from a Traditional Individual Retirement Account in most circumstances. Withdrawals from Traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. 9. The guarantees of an annuity contract depend on the issuing company’s claims-paying ability. Annuities have contract limitations, fees, and charges, including account and administrative fees, underlying investment management fees, mortality and expense fees, and charges for optional benefits. Most annuities have surrender fees that are usually highest if you take out the money in the initial years of the annuity contact. Withdrawals and income payments are taxed as ordinary income. If a withdrawal is made prior to age 59½, a 10% federal income tax penalty may apply (unless an exception applies). 10. SSA.gov, 2023
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