Okay, so you have an idea of how much you will need and how much you have for retirement, you know the social security age requirements and you have figured out how to maximized you full Social Security benefits…. What’s next on the list?
- Plan on Working in Retirement? Know the Social Security Earning Limits
You can work and collect Social Security at the same time. But if you make more than $19,560 a year in 2022, your Social Security benefits will go down.
Here’s how it works:
Once you hit full retirement age, working doesn’t impact your Social Security benefits — no matter how much you earn.
If you’re not yet at full retirement age but receive Social Security benefits, you can make up to $19,560 a year without penalty. (For context, that’s $1,630 a month, or $376 a week).
After that, your benefits are reduced by $1 for every $2 you make over $19,560.
But — and this is really important — that money isn’t gone forever.
Once you reach full retirement age, Social Security will recalculate your monthly benefit amount and give you credit for the months they reduced your payment.
- Get Familiar with Your Health Care Options
Even if you’re in good health now, it’s important to plan ahead and understand your health care options.
If you retire before age 65, you’ll likely lose health coverage at work and need to find your own health care. At 65, you’re eligible for Medicare.
You might be able to get coverage through a spouse’s plan, assuming you’re married to someone with workplace health coverage. (If they’re on Medicare, they can’t add you to their plan).
Another option is to extend your employer’s insurance benefits through COBRA for 18 months. But at an average cost of $400 to $700 per person per month, it’s a pricey option.
Health Insurance Options for Early Retirees
Try to find a part-time job that offers health care coverage. Just be mindful of those Social Security earning limits.
Find an insurance plan on the Health Insurance Marketplace. Losing health coverage at work qualifies you for a 60-day special enrollment period on the marketplace — the federal government’s health care shopping and enrollment service for uninsured Americans.
See if you qualify for Medicaid in your state. Especially if you know your income in retirement will be small.
Get a private health insurance plan on your own. This can be complex and costly, especially if you’re in poor health or on a limited income.
- Understand How Your Social Security Benefits Are Taxed
Your Social Security benefits are technically income. So do you owe taxes on Social Security? In some cases, yes.
If you have additional income, whether it’s from a job or investments, there’s a good chance at least part of your Social Security will be taxed.
Retirees must pay federal income taxes on their Social Security benefits if:
Half of their yearly Social Security benefits + other income = more than $25,000 for single filers or $32,000 for married couples filing jointly.
The IRS won’t tax your entire Social Security income, even if you exceed those thresholds.
Instead:
50% of your Social Security benefits are taxable if:
Half of your benefits + other income = $25,000 to $34,000 for individuals or $32,000 to $44,000 for married couples filing jointly.
85% of your Social Security benefits are taxable if:
Half of your benefits + other income = $34,000 and up for individuals or $44,000 and up for married couples filing jointly.
Keep in mind that while 50% or 85% of your Social Security benefits may be taxable, they will be taxed at your ordinary income rate.
This commentary was originally posted by Rachel Christian, CEPF® AUGUST 2, 2022
Source: https://www.thepennyhoarder.com/retirement/retirement-checklist/
**Disclaimer: This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.