When it comes time to retire most people look forward to their Social Security benefits for extra money. What most people don’t give much thought to is how they will be taxed. Up to 85 percent of your benefits could be subject to income taxes, depending on your personal situation so it’s wise to find out more before you decide when to start taking Social Security.
If you haven’t done so already, you will need to plan for the taxes you owe in retirement, whether you have money withheld from your Social Security checks or make payments to the IRS quarterly.
You may find that it is to your advantage to delay claiming your Social Security benefits well past age 62. Age 62 is the first point at which people can take their benefits. But because they are taking those payments early, those checks will be permanently reduced.
Age 66 or 67 is generally considered full retirement age, depending on the year in which you were born. At that point, you are eligible to receive 100 percent of your benefit.
If you can delay your benefits even further, they will go up by 8 percent every year up to age 70. That is why it is important to decide how long you can delay. If you are in good health and financially stable there is no reason why you should start taking your benefits early.
You also need to consider how your income from Social Security and other sources will be taxed. Planning for your future after retirement is important and should be addressed as soon as possible. Your Social Security benefits are subject to taxes under certain conditions. How your Social Security benefits are taxed depends on a variety of factors that are different for every individual. It’s never too soon to start planning so seeing a tax professional soon is a good idea.