Smart Retirement Savings

Social Security Tips and Traps

Social security withdrawal to me is still 30 years aways from me. I'll only pray if most of the tips and traps will still hold true. Nevertheless, Sue Stevens contributed a good article for those in need a few quick doses of Social Security education.

Tips

--When you get your annual estimate of Social Security benefits, check to make sure your earnings history is accurate. Everyone age 25 and older should be receiving an annual statement. If you suspect something is wrong, contact your local Social Security office to correct any inaccuracies.

--If both spouses work, each is entitled to a benefit based on his or her own earnings history. However, the spouse with lower benefits is entitled to the greater of 50% of his or her spouse's benefit or his or her own benefit.

Traps

--If your income is more than $25,000 single (or $32,000 married filing jointly) and you're receiving Social Security benefits, you'll pay income tax on 50% of your Social Security benefits. However, if your income is more than $34,000 single (or $44,000 married filing jointly), you may have to pay income tax on 85% of your benefit.

--If you are working, are younger than full retirement age, are earning more than $12,960 (2007), and are taking Social Security benefits, you'll actually lose $1 for every $2 you earn above $12,960. In the year when you reach your full retirement age, you'll lose $1 for every $3 you earn above $34,440 (2007). At full retirement age, you can work and not lose any of your benefits (although if you keep working to age 70, you'll get even higher benefits).

--You can continue to collect Social Security benefits even if you retire abroad unless you live in Cuba or North Korea. You may also not be able to receive benefits if you are in Cambodia, Vietnam, or countries from the former Soviet Union (although some exceptions may apply).