Social Security is a vital financial lifeline for millions of Americans. However, there are several factors that can put your benefits at risk. Claiming benefits early, working while claiming Social Security, taxation on your benefits, divorce, and not keeping an eye on your earnings record can all impact your Social Security earnings.
While you can start collecting Social Security at age 62, doing so means you’ll receive a smaller monthly benefit for the rest of your life. If you’re in good health and can afford to wait, holding off until your full retirement age or even age 70 can result in a much larger benefit. If you start drawing benefits before your full retirement age and continue to earn income, your benefits could be temporarily reduced depending on how much you make.
There’s a cap on how much you can earn before Social Security withholds part of your benefits.
Social Security claiming and earning issues
Depending on your overall income, a portion of your Social Security benefits could be subject to federal taxes.
If you’re withdrawing from other retirement accounts or earning income through investments, you may find yourself owing more in taxes than you anticipated. If you were married for at least 10 years, you may be eligible for benefits based on your ex-spouse’s work record. However, if you remarry, you could lose access to these benefits.
Your benefits are calculated based on your 35 highest-earning years, so if there’s an error in your earnings history, you could end up with less than you deserve. It’s a good idea to regularly check your Social Security statement to ensure all your earnings have been accurately reported. By being aware of these factors and managing them wisely, you can help ensure that your Social Security benefits remain a reliable source of income during your retirement years.
Working with a tax advisor can also help you minimize the impact of taxation on your benefits.
