Nov 11, 2021
Last week we discussed Social Security earning limits. Whether you want to work a few hours a week or continue with your current career it's important to understand how this impacts your Social Security. You've been paying into this program. You want to make sure you have a strategic Social Security plan. After our discussion last week, we had some listener questions come in. So we are going to answer some of these "Yes...but..." questions and clear some things up about the nuances of Social Security.
"What if I work in the year I reach full retirement age?"
The full retirement age is 66 or 67, depending on the year you were born. If you are younger than your full retirement age the earnings limit is $18,960 a year. If you are at full retirement age your earnings limit is $50,520. Now, if you are working leading up to your 66th or 67th birthday the lower earnings limit only applies to the months before your birthday.
"What if my spouse retires and I continue working?"
A lot of people decide to do this. This can be a great decision for couples and it's important to understand your spousal benefit options. If one spouse retires and one continues to work, the earnings of the working spouse don't count towards the retired spouse's earnings limit. It's going to be person to person.
"Why does the government take 20% of my 401(k) withdrawals?"
It's the law, it's the way it is. Sometimes there isn't a why to our questions, it's just a rule we have to follow. Now there are ways to mitigate this or prepare for this in your plan. You can roll your 401(k) over to an IRA. Your money stays tax-deferred. Then you won't have that 20% tax deduction when you pull out. However, you need to keep in mind that this is still a tax-deferred account and when you reach the age of 72 you will have to start taking required minimum distributions and you'll pay taxes on these distributions. Whether you decide to roll over your 401(k) or not will be specific to your situation. Maybe you are still working and your company is matching what you put in. Or maybe you are fully retired. Whatever your situation is, it's best to meet with a financial advisor that can customize your strategy and plan.
Listen to the full episode for more details or skip around to certain topics.
1:19 – New phone story
3:03 – Quick review on Social Security
5:09 – Working in the year you reach full retirement age
6:21 – What if my spouse retires and I continue working?
9:08 – Should I wait to start Social Security or start sooner?
11:28 – Doing things differently than someone else
12:56 – Why does the government take 20% of my 401(k) withdrawals?
14:23 – Can I get out of paying the 20% in tax?
15:25 – Should I move my 401(k) to an IRA?
For more, visit us online at http://flemingfinancialservices.com