Three Things To Know Before Taking Social Security

No matter your age it is never too early to think about the best ways to take your social security benefits and how they will play a part in your retirement years.

Be Aware of the Full Retirement Age
Upon reaching the age of 62 you are technically allowed to start taking your social security benefits. However, it is important to know that if you start receiving your benefits before your full retirement age then your benefits will be reduced for the rest of your life. The earlier you take them, the more they will be reduced. Your full retirement age is dependent on when you were born. You can find your full retirement age here, https://www.ssa.gov/planners/retire/retirechart.html. If you reach your full retirement age and decide you want to keep working this will help you in retirement as they will increase your payments by a percentage for every year you choose not to take your benefits until you reach the age of 70 when these increases will stop.

How Much You Will Actually Be Receiving
Social security is decided based on your income of 35 working years. For those of you who work for more than 35 years, they will take your highest earning years to figure out your payments. If you have not worked a total of 35 years a '0' will be averaged in for every year you did not work which will reduce the amount you receive monthly. It is important to keep in mind that social security was never intended for you to be able to fully retire on. Having other sources of income or having a healthy amount built up in your savings will ensure you can have a comfortable retirement. In order to fully plan you might want to use a social security calculator (https://www.ssa.gov/oact/quickcalc/) to determine how much you will be receiving.

Taxes
There is a good chance that you might have to pay taxes on your social security payouts. In 1983 Congress passed a law stating that social security payments are subject to federal income tax depending on how much you receive. Later those rates were set a bit higher than they initially had been and now if you make between $25,000 and $34,000 individually you can be taxed up to 50% of your benefits. If you make more than $34,000, 85% of your benefits can be taxed. If you file jointly with a combined income of between $32,000 and $44,000 you will also see a tax rate of up to 50%, and if you make more than that, 85% of your benefits are taxable. If you are married but file separate returns you will more than likely pay income tax on your social security. If you do end up having to pay taxes you can choose to have them withheld from your benefits or you can make quarterly payments.