As you plan on your retirement, one of the best, prudent financial moves you can take is to maximize your Social Security benefits as much as possible. The question is, why and how? The main reason for this course is that when you retire, the sources of income and Social Security could end up being the primary source of income for you. With these three moves, you can successfully achieve your goal to maximize your Social Security benefits.
Move to a state that doesn’t tax benefits
In the United States of America, 13 states tax your social security income. This means that, for any income treated as social security income, deductions are made to affect the tax requirements of the state’s tax laws. These states include:
• New Mexico• North Dakota
• Rhode Island
• West Virginia.
If you are a resident of these states, you can still smile, especially a low or moderate earner. The reason is that, even if there are taxes, you will be exempted if your income falls within this bracket. If your income is considered high upon retirement in these states, the best move is to move to another state and establish yourself there.
Keep your retirement savings in a Wealth-Builder Account – Tax Code 7702
You must always have in mind that the federal government imposes taxes on Social Security benefits, which depends on your provisional income. This means that the tax you pay is solely dependent on the provisional income that you earn.
When calculating your provisional income, the government takes 50% of your annual benefits and adds it to other income that is non-security related. If your income surpasses $25,000 as a single person or $32,000 when filling married couple, tax on social security applies.
After considering Wealth-Builder Account withdrawals, which are tax-free, you will end up saving more. Not forgetting, the withdrawals do not count toward provisional income. When your income is just the Tax Code 7702 withdrawals and Social Security benefits, you have successfully escaped IRS taxes.
Don’t earn too much if you’re working and collecting benefits at the same time.
When you are finally at your retirement age, there is a possibility you could earn income without it affecting the social security benefits. But if you were simultaneously collecting benefits before your retirement, the earnings test will be subjected to you. The test will imply that if you exceed set limits, some of your benefits will be withheld. For example, if you earn up to $18,960, your earnings will not be impacted, but if you exceed this amount, you’ll have $1 in Social Security withheld per $2 of earnings you bring in.
With these considerations, keep your earnings low to avoid surpassing these thresholds. In addition, it’s also good to note that if you have your benefits withheld, they are paid once you retire. Since you’ll have to accept a reduced benefit for filing for Social Security before FRA, you might as well try to avoid them losing some of that money temporarily.
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Financial management and decisions are easy tasks for everyone. That is why you need an expert who can guide you by offering some of the best strategies to handle your financial situation. Make a move today and contact us for viable financial solutions.