Social Security is a complex payment system that is difficult to navigate. Most individuals close their eyes and hope for the best when it comes to how much they will receive in benefits, but this is a poor technique if you want to accurately plan your future. Benefits are not intended to replace income, so those who rely on them to make ends meet after leaving the workforce must plan carefully.
Given that, according to U.S. Census Bureau data from 2022, the national middle-class income range is between $49,271 and $147,828 and the median household income that year was $74,580, the average 55-year-old earning that amount today and planning to take Social Security at age 62 would receive an estimated monthly benefit of approximately $1,869 per month. This translates into $22,428 per year.
It sounds great as long as the retiree has other savings, but relying solely on Social Security would be insufficient to maintain a good standard of living in most parts of the country, especially since the U.S. Department of Health and Human Services has set the 2024 poverty line at $15,060 for one person.
All is not lost for individuals who are still working and can afford to plan ahead; there are various techniques for increasing Social Security income.
Delay claiming Social Security benefits
Retiring early may seem like a dream, but it can quickly turn into a nightmare. For the majority of people, retiring and claiming benefits at age 62 (or earlier) is not a good idea.
As Medicare begins at the age of 65, it results in lower benefits and, more likely, increasing medical costs. Waiting until you reach 70 to collect benefits will result in the best outcome, so increase your retirement assets and savings or pick a less demanding but still profitable job.
Explore other investments and savings vehicles
In the same line, consider diversifying your investing portfolio and perhaps taking a chance with some money you are willing to lose. Maximizing Social Security benefits is crucial, but given their restrictions, it should be part of a comprehensive retirement strategy. Middle-class retirees might explore supplementing their benefits with part-time work, rental income, and investments.
Consider the tax consequences
Those who exclusively get Social Security benefits and have no other source of income are not taxed; however, because this is not the aim, a portion of your payments will most certainly be taxed at the federal level.
Understanding how other sources of income, such as pensions or investment withdrawals, affect the taxability of your benefits will prevent you from unpleasant surprises down the road. It may also assist you reduce your tax liability by properly planning withdrawals.
Investing
The stock market is not the only method to invest nowadays; the real estate market has always been a fantastic location to put your money, especially if you want to diversify your asset portfolio.
Not everyone would love becoming a landlord, but if you don’t want to profit from the passive income and instead want to sit back and watch the property appreciate, you may always rent through an agency. They will charge a commission but remove most of the bother out of the transaction.
Saving
Do not overlook your savings accounts. Investing is enjoyable, but the money is unavailable to you on demand, whereas having some of your cash accessible in a high yield investment account will enable you to release them with greater simplicity if you require them. It will still require a waiting time, but there will be no additional taxes or tasks to complete.
Also See:- New Social Security Law Will Change Everything About Benefits – It Will Affect Checks, Too