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Maximizing Social Security Benefits for Middle to Upper-Income Retirees

Navigating Social Security benefits takes some intention, research and planning. From inflation considerations to your portfolio and tax management, maximizing Social Security benefits is a complex effort. There are a few extra factors to consider if your family falls into a middle to upper-income bracket.

What are the main factors to consider when nearing retirement age and how do they affect your family’s financial situation? Let’s navigate it together.

Delay Claim

To achieve the largest Social Security retirement benefit, it is advantageous to work until your full retirement age. Take a look at retirement age details here. While you can retire early and still receive benefits at age 62, it will reduce the overall benefits amount. Weigh out your quality-of-life factors compared to your financial landscape to commit to the best time to retire.

Maximize Earnings

Social Security payouts are calculated based on 35 years of work in which you earn the most. The more earnings, the more Social Security benefits will be available at retirement. If you do not work a full 35 years, zeros are factored into the equation.

On the flip side, if you work more than 35 years a high-income year can cancel out a low-income earning year. Understanding these factors, consider working at least 35 years to ensure the maximum amount. Then, find additional methods to increase income during working years to fully maximize the benefit.

Protect Investments

One way to effectively use Social Security benefits in retirement is to protect and minimize withdrawals from investment accounts. This strategy promotes more investment growth and protects inheritable assets while still maintaining a solid quality of life. Unlike investments, Social Security cannot be passed to heirs other than a spouse, so preserving investments may be the more beneficial option to prioritize.

Minimize Taxes

While low-income households typically do not pay taxes on Social Security income, 40% of beneficiaries have to pay income tax on part of their benefit. There are many ways to reduce taxes on Social Security benefits including managing retirement income sources, setting up Social Security tax withholding and staying below taxable thresholds. Withdrawing from a tax-efficient retirement account could have a positive impact on the taxation of Social Security benefits.

Most middle to upper-class families would owe taxes on a portion of their Social Security benefits. Explore the tax calculation details here. Given the complex nature of multiple income streams and their taxation, consulting a professional could be in your best interest to maximize tax savings.

Professional Advice

It is important to consider a variety of factors when nearing retirement. Having a professional in your corner could help provide new strategies, data or a new perspective on your financial outlook. Consider partnering with a professional to ensure you have secured the financial outlook you’ve worked so hard for.

Bankers Life is Here

At Bankers Life, we are here to help guide you to retirement and beyond. Contact us for financial guidance and support as you prepare to manage your finances in retirement.

Insurers and their representatives are not permitted by law to offer tax or legal advice. The general and educational information here supports the sales, marketing or service of insurance policies. Based upon individuals’ particular circumstances and objectives, they should seek specific advice from their own qualified and duly-licensed independent tax or legal advisors.