The 10 Most Important Things About Social Security

One key change in social security rules for 2017 is the tax cap. Social security cannot tax anyone whose income exceeds $127,200. The same rule applies to the calculation of retirement benefits. Beginning in 2017, workers who earn more than $127,200 will see a bump in their paychecks once they are no longer required to pay social security tax.

It is also important to understand how social security calculates your years of earnings. Social security uses 35 years of your highest earnings to calculate your payments. So if you work less than 35 years, zeros will be calculated for the years you didn't work. The bottom line is, if you work 35 years or more, you can expect a higher social security retirement payment.

In 2017, the average payment of a retired worker is $1,360 per month, and couples bring in $2,260. Each year, monthly payments are eligible for an inflation adjustment according to the Consumer Price Index for Urban Wage Earners and Clerical Workers. Cost of living adjustments are not made every year. In fact, retirees saw no adjustment in 2010, 2011 or 2016. The largest adjustment was made was 14.3 percent in 1980.

The longer you work, the higher your retirement benefit. Although workers are eligible to retire at the age of 62, most opt to work longer. There are a number of factors that play a role in your retirement. According to the Government Accountability Office, most people who visit social security lack the information to make sound decisions about retirement. Depending on your birth year, your retirement benefits could drop 25 to 30 percent if you retire at the age of 62. For example, if you sign up at the age of 66 and qualify for $1000 per month, that amount would drop to only $750 per month if you sign up at 62. In most cases, people retire after the age of 65 because there is a huge gap in how much you stand to receive.

Full retirement for baby boomers is at the age of 66. the age of 60 is when you should really start paying attention to retirement. If you were born between 1943 and 1954, you should expect to receive full retirement benefits. After this, the full retirement age then gradually increases. Making the wrong decisions could have a huge impact on your finance. Before you leave your job, make sure you have everything in place, such as insurance. And delaying retirement can also give you time to incur additional funds in the event you need them.

Full retirement age is expected to increase to 67. This is primarily because people are living longer and in better health. So, if you were born 1960 or later, you will be eligible. Generation X members and baby boomers must now wait at least two more years than their grandparents to receive full retirement benefits.

According to Money, 70 is the magic age to maximize your monthly retirement payments. This is beneficial to your because for each month you delay up to the age of 70, monthly benefits will increase. Depending on your birth year, monthly payments can increase anywhere from 24 to 32 percent. Although some people opt to work beyond the age of 70, there is no additional social security gain to it.

There are rules regarding working if you sign up for social security at the age of 65 or younger. If you make more than $16,920 in 2017, part of your payments could be withheld temporarily. $1 will be held back for every $2 you go over the income limit. If you are 66 years old, you have a higher earning limit of $44,880. The penalty changes to the withholding of $1 for every $3 above the income threshold.

Your social security benefits are subject to tax if your adjusted gross income, non-taxable interest and half your social security exceeds $25,000 for one person or $32,000 for a couple. So the rule of thumb is keeping your earnings below that threshold. The good thing is that the average retiree doesn't make so much money that they will ever have to worry about their social security being taxed.

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