Baby Boomers and Social Security Benefits
There are almost 75 million baby boomers approaching retirement. At 62 years of age, these baby boomers can choose to receive Social Security benefits. The Social Security benefit is available to all who have turned 62 and have worked for at least 10 years or 40 credits. Although there can still be some confusion amongst baby boomers as to when they should start taking their retirement benefits.
There are many reasons to delay your Social Security benefits at least until the complete retirement age. The benefits increase by 7% each year that benefits are not taken. This can improve the living standard of baby boomers to a great extent in years to come. The decision to take benefits earlier or later is solely a matter of preference, but boomers should consider the many factors before taking a decision.
The foremost factor is life expectancy. If your parents are still alive and living a ripe old age and you are living a healthy life as well, then avoiding the benefits will fetch you 30%- 70% more on payments each month.
However, if you’re suffering from any chronic illness or have a similar family history, then it’s prudent to start on the Social Security benefits as soon as possible to make the most out of them.
Another important factor is your present cash need. Unless you have another income source to fund your expenses until the age of retirement, chances are you will want to receive Social Security benefits early.
The third factor is whether you’re working or not. If you continue working after retirement age and your combined income is above a certain limit, then you’ll have to pay taxes on the Social Security Income. Combined income here means the gross income added to the non-taxable interest and half of Social Security benefits.
If you file income taxes separately and the result lies somewhere between $25,000 and $34,000, you might be required to pay income taxes of up to 50% of the Social Security benefits. If the combined income is above $34,000, you may be required to pay income taxes of up to 85% of the Social Security benefits.
Wait Until Complete Retirement?
Baby boomers can also wait until the complete retirement age to receive benefits. In this case, they’ll receive 8% percent retirement credits until the age of 70. This is applicable on the certainty of a long life, and if you think you can wait.
Withdrawal of Application?
Baby boomers can also take advantage from the “withdrawal of application” opportunity. According to this provision, potential retirees can apply to receive Social Security upon at the age of 62. They can receive payments and save or invest them until the retirement age or even until 70. At that time, you can start receiving benefits at the same level, only if you pay for all the benefits you have received.
There are no charges upon repaying the amount and you can keep all the investment gains you have accrued. Moreover, if you have ever paid federal taxes on the benefits, you can recoup them with a deduction or a credit.
Baby boomers and the social security benefits are a sticky issue. Most experts advise that you should not start Social Security benefits until you really need them, but boomer should consult with their financial planners before making a decision.
Author: Sheila Martin
Publish Date: Fri, 12/02/2011 - 12:06