Planning for your retirement effectively with Social Security benefits
No matter how old you are, when it comes to retirement you’re never too old to start planning for retirement. When it comes to Social Security benefits, people have roughly 40% of the pre-retirement income. However, it usually takes 70% of someone’s pre-retirement income to live their lifestyle in retirement.
Barry Bigelow with Great Waters Financial, said sometimes people use social security as their main source of income in retirement.
“You can claim a Social Security benefit as early as 62 and you can hold off on claiming it all the way to age 70.” Bigelow said. “Between those two ages, Social Security will increase for every year that you delay by 6 to 8%. So it’s a 6 to 8% guaranteed rate of return or increase on your Social Security benefits.”
Retirees, people with disabilities and even children receive social security benefits to live on and pay their monthly expenses. Social security benefits increase when the the consumer price index increases.
“Social Security cost of living adjustments are not meant to keep up with inflation… Most of the cost of living adjustment this year may get eaten up by an increase in Medicare costs,” Bigelow said. “These cost of living adjustments do increase the actual dollars to your home can help pay for some things, especially if gas prices come down. Now, you’ll actually have some space in your budget to pay for things like bread and prescription drugs.”
Some retirees delay receiving money from social security. Bigelow says its important to research how taxes can impact your benefits.
“Make sure you’re paying attention in your plan to whether or not if you make a large IRA withdrawal to buy a car, or put a down payment on a house,” Bigelow said. “Understand the taxation of Social Security within the state of Minnesota. Make sure you understand those levels so you don’t end up getting an extra tax when you don’t realize it’s happening.”