5 things you need to know before leaving

Millions of Americans quit their jobs this year Great resignation Occupy the American labor market.

But many of these workers did not really resign—they retired.

According to the Washington Post, since the pandemic, the retirement population in the United States has increased by about 3 million. This is related to the double retirement trend before the pandemic.

Generous federal stimulus checks, strong stock market rises and rising house prices have prompted some wealthy Americans to retire early.

At the same time, some middle-income Americans are forced to retire due to unemployment, COVID-19 health issues and care responsibilities.

If you are considering retirement in 2022, here is a list of things you need to know and do before calling it a career.

5 basic things on the retirement list

Retirement is calling your name-but can your budget handle it? Check out these tips to avoid financial stress and worries during your golden years.

1. Know your social security full retirement age

You can start receiving social security retirement benefits as early as 62 years old. But if you choose in advance, your monthly benefits will be greatly reduced.

You are not eligible for full social security benefits until you reach the so-called Full retirement age.

The full retirement age used to be 65, but this has been the case for some time.

The Social Security Administration now determines your full retirement age based on your year of birth:

  • If you were born between 1943 and 1954, your full retirement age is 66.
  • If you were born between 1955 and 1960, your full retirement age will gradually increase to 67 years.
  • The full retirement age for anyone born since 1961 is 67 years.

By working beyond the full retirement age, you can get greater monthly benefits.

Every month you do not receive social security benefits, your benefit amount will increase, although this increased benefit reaches its maximum at age 70.

Expert tips

When you reach 70, the monthly benefits will be 77% higher than when you were 62.

2. Know how to maximize your social security benefits

As we mentioned above, you can increase your social security benefits by working beyond the full retirement age.

have Other ways to improve monthly benefits, But unfortunately, there is no quick fix.

Almost all strategies that might increase your social security check boil down to: work longer, make more money and wait as long as possible.

Work for at least 35 years

Social Security uses your highest income 35 years to calculate your benefits, so it is wise to stay in the labor market for at least that long.

Working for more than 35 years can really pay off, especially if your income is much more than your early career, because you can replace some low-income years with higher wages.

Report all your income

Be sure to report the income you have earned through tips, freelance and self-employment throughout your career. Failure to report these incomes may reduce the amount of social security you receive in the future.

Marriage and divorce are different

How much you get from social security also depends on your marital status.

For example, if you are divorced and never remarried, you may be eligible for Apply for benefits based on your predecessor’s work records (The premise is that your marriage has lasted at least 10 years).this way Will not affect their welfare.

Or, if your current or former spouse dies, you are eligible for 100% of their benefits, if you Meet certain requirements.

3. If you plan to retire, please understand the social security income limit

Yes, you can Work and receive social security at the same time.

However, if your annual income exceeds $19,560 in 2022, your Social Security benefits will decrease.

This is how it works:

  • Once you reach full retirement age, work will not affect your social security benefits-no matter how much money you make.
  • If you have not yet reached full retirement age but receive Social Security benefits, you can earn up to $19,560 per year without penalty. (For context, it is $1,630 per month, or $376 per week).
  • After that, for every $2 you earn over $19,560, your benefits will be reduced by $1.

This is an example.

Suppose you start receiving social security payments at the age of 62 and receive $1,200 per month.

A few years later, you return to work and earn $30,000 in a calendar year.

The limit is exceeded by $10,440, so your annual social security benefits will be reduced by $5,520, or $460 per month.

In other words, if you make $30,000 in a year between the age of 62 and your full retirement age, your monthly check of $1,200 will be reduced to $740.

But-this is really important-money will not disappear forever.

Once you reach the full retirement age, the Social Security Administration will recalculate your monthly benefit amount and provide you with credit in the months when they reduce payments.

4. Familiarize yourself with your healthcare options

Healthcare may be one of your biggest expenses after retirement.

This is why it is important to understand your health care options.

  1. If you retire before the age of 65, you may lose your job security and Need to find your own healthcare.
  2. At 65, you are eligible for Medicare.

People who retire early may find themselves in a difficult health care situation.

Assuming you are married to someone who has workplace health insurance, you may be able to get insurance through a spouse’s plan. (If they use Medicare, they cannot 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 US$400 to US$700 per person per month, this is an expensive option.

Other health insurance options for early retirees include:

  • Try to find one Part-time job providing medical insurance. Please pay attention to those social security income restrictions.
  • Find plans on the health insurance market. Losing health insurance at work will qualify you for a special registration period of 60 days in the market-the federal government’s healthcare shopping and registration services for uninsured Americans.
  • Check if your state is eligible for Medicaid. Especially if you know that your income after retirement will be very small.
  • Purchase private health insurance yourself. This can be complicated and costly, especially if you have poor health or limited income.

We would love to say that things become easier when you turn 65 and join Medicare, but this is not always the case.

Contrary to popular belief, this federal health insurance plan is not free, nor does it cover all your health care costs.
have A lot of knowledge about medical insurance -Much more than we can cover here.

But here are some important guidelines about medical insurance:

  • If you are already receiving social security benefits when you are 65, you will automatically be enrolled in Medicare. You don’t need to do anything else.
  • If you get coverage through the Marketplace plan, COBRA through TRICARE from past employers or retired military personnel, you must enroll in Medicare when you are 65 years old.
  • If you are still working and enrolled in your employer’s group health plan, or your spouse is still working and you are covered by their plan, you may not need to enroll in Medicare immediately. But be sure to consult your employer.
  • Otherwise, your Medicare eligibility starts around your 65th birthday, and you have seven months to register.

If you have a Social Security disability for at least 24 months, you will only be eligible for Medicare until you are 65 years old. People diagnosed with end-stage renal disease or ALS are also eligible.

5. Know how your social security benefits are taxed

Your social security benefits are technically income.You too Social security tax owed?

In some cases, yes.

If you have extra income, whether it comes from work or investment, your social security contributions are likely to be at least taxed.

If you are a single filer:

  • If your income is less than $25,000, 0% of your benefits are taxable.
  • If your income is between $25,000 and $34,000, up to 50% of the benefits are taxable.
  • If your income exceeds $34,000, up to 85% of benefits are taxable.

If you are married, declare together:

  • If your total income is less than $32,000, 0% of your benefits are taxable.
  • If your total income is between US$32,000 and US$44,000, 50% of your benefits are taxable.
  • If your total income exceeds $44,000, 85% of your benefits are taxable.

Remember, “taxable” does not mean the taxes you have to pay. Suppose you are a single filer with an income of $30,000: $20,000 comes from Social Security benefits, and $10,000 comes from 401(k) withdrawals.

This simply means that in the eyes of the IRS, your income is $20,000: $10,000 in the 401(k), plus 50% of the $20,000 in Social Security benefits. Uncle Sam can’t touch the remaining 50%.

If Social Security is your only source of income, you probably won’t pay any taxes for it. The average annual income is only US$18,516, and you can earn up to US$25,000 before taxes.

Rachel Christian is a certified personal finance educator and a senior author of The Penny Hoarder.






Source link

Recommended For You

About the Author: News Center