Social Security benefits can be a reliable source of retirement income, but knowing when to file and how benefits are taxed is an important part of retirement planning. After contributing to the system for decades, these are benefits you have earned. The key is making a thoughtful decision about when and how to claim them.
You are eligible to begin claiming Social Security retirement benefits at age 62. However, filing early will permanently reduce your monthly benefit. For most individuals, full retirement age falls between 66 and 67, depending on your birth year. Waiting until full retirement age allows you to receive your full benefit amount, and delaying benefits beyond that point, up to age 70, can increase your monthly payment through delayed retirement credits.
You can apply for benefits by visiting ssa.gov and completing the online application. Before filing, it is important to evaluate how Social Security fits into your broader retirement income strategy.
Another consideration many retirees overlook is the taxation of Social Security benefits. Depending on your income level, a portion of your benefits may be subject to federal income tax. The IRS calculates this using provisional income, which includes:
Your gross annual income
50% of your Social Security benefits
Taxable interest and certain additional income sources
As provisional income increases, up to 85% of your benefits may become taxable. Coordinating withdrawals from retirement accounts and managing overall income levels can help reduce unnecessary tax exposure and support a more efficient retirement plan.
Social Security planning can feel complex, but it does not have to be overwhelming. If you would like clarity around when to file, how taxes may impact your benefits, or how Social Security fits into your overall retirement plan, schedule a consultation with R Wilde Paule of Keystone Wealth Management today.