3 common mistakes that can cause you to lose your US pension
Social security benefits can be a lifeline in retirement and help bridge the gap between what you've saved and what you need to maintain a comfortable lifestyle. Fox Business... However, many people can inadvertently deprive themselves of their US pension.
Approximately 37% of people aged 60+ consider social security as their main source of income upon retirement, according to a report from the Transamerica Center for Pension Research. If you have plans like this, it is especially important to make sure you are aware of some of the mistakes that could cause you to lose your payouts.
1. Your work experience is less than 35 years
To be eligible for retirement benefits, you generally have to work and pay Social Security taxes for at least 10 years. However, if you have worked for less than 35 years by the time you started applying for benefits, you may receive smaller checks.
The Social Security Administration calculates the basic benefit amount — or the amount you will receive when you reach full retirement age — using the average of your income over the 35 most successful years of your career, and then adjusting it for inflation.
If you haven't worked for the full 35 years, zeros will be added to your equation to account for the years you weren't working. This can lead to a decrease in average income, which in turn will lead to a decrease in the amount of the benefit.
2. You are not using all the benefits to which you are entitled
When you think about Social Security benefits, pensions are likely to come to mind. But there are other types of benefits that you may be eligible for, including spousal benefits, post-divorce benefits, or survivor benefits.
If your spouse has a higher income and is eligible for Social Security benefits, you may be eligible for benefits as his spouse. The maximum amount you can receive from spousal benefits is 50% of the amount that your spouse is entitled to receive at full retirement age. Likewise, if your former spouse is eligible for benefits, you may be eligible for post-divorce benefits based on their work record if you have been married for at least 10 years and are not currently married.
If you are eligible for Social Security benefits based on your own work record, the Social Security Administration will pay them first. Then, if you are eligible for more money in the form of marriage or divorce benefits, you will receive a little more each month.
Survivors' benefits are usually provided to widows and widowers aged 60 and over, but children, parents, and other family members who were financially dependent on the deceased are sometimes also eligible for these benefits.
3. You forget about social security taxes
Even though you have been paying into Social Security for years, the government will still try to collect some of your benefits in state and federal taxes.
Depending on where you live, you may or may not pay state taxes - each state has its own laws in this regard. Some have no tax, others have it and depend on your income.
The amount you owe in federal taxes will depend on your “gross income,” which is half your annual benefit plus other sources of income (excluding Roth IRA payments). If your total income is more than $ 34 per year (or $ 000 per year for a married couple), you will be required to pay federal taxes on up to 44% of your benefits.
While you may not be able to avoid taxes on benefits, you can do your best to plan ahead.
On the subject: US cities with the highest and lowest taxes for retirees
How to make the most of your retirement
Social Security benefits are an integral part of many Americans' retirement plans. It is wise to use them to the fullest. After making sure that you have worked long enough to receive the full benefit amount, apply for all benefits to which you are eligible, and remember to include taxes. Then you will be well on your way to achieving financial stability in retirement.
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