Social Security serves as a lifeline for the millions of seniors who rely on it to pay the bills. If you’re eager to make the most of your benefits, all the while avoiding unwanted surprises at present, here are a few key mistakes you’ll want to steer clear of next year.
1. Not knowing your full retirement age
Though your Social Security benefits are calculated based on your lifetime earnings, the age at which you first file for them can cause that number to change. If you want to avoid losing out on benefits, you’ll need to wait until you reach full retirement age, or FRA, to claim them. However, that age can change based on your year of birth.
If you were born in 1953, you’ll reach your FRA of 66 in 2019, and you’ll therefore be entitled to collect your full monthly benefits without a reduction. But if you were born in 1954, you’ll have to wait until the following year to be eligible for full benefits.
Keep in mind that if you were born before 1958, you’ll be allowed to claim Social Security in 2019, since the earliest possible filing age is 62. Remember that any time you take benefits ahead of FRA, you reduce them to some extent. Furthermore, since folks born after 1954 have a later FRA than those born in or prior to that year, it’s important to understand the ramifications of filing at various dates. You can use the following table to see when you’ll reach FRA based on your year of birth:
| Year of Birth | Full Retirement Age |
|---|---|
| 1943-1954 | 66 |
| 1955 | 66 and 2 months |
| 1956 | 66 and 4 months |
| 1957 | 66 and 6 months |
| 1958 | 66 and 8 months |
| 1959 | 66 and 10 months |
| 1960 | 67 |
2. Not accounting for taxes on more of your earnings
Though many people regard Social Security as a welfare program of sorts, the truth is that those benefits are earned by paying into the system and racking up enough lifetime work credits to quality for retirement income down the line. Therefore, while you might grumble when you see that a portion of your take-home pay is lost to Social Security taxes, you should, at the same time, recognize that you’re paying into a system that will provide for you when you’re older.
That said, the income cap at which Social Security taxes are applied is increasing in 2019, which means if you’re a higher earner, you’ll lose a bit more money than in 2018. For the current year, the maximum taxable income for Social Security purposes is $128,400, but come next year, that limit will increase to $132,900. This means higher earners will be on the hook for taxes on an additional $4,500 of income.
If you’re a salaried worker, you’ll be responsible for paying a 6.2% tax on that extra $4,500 for a total of $279. If you’re self-employed, though, you’ll pay double that amount for a total of $558. Be sure to plan for this expense accordingly to avoid getting caught off guard.
3. Not fighting for a raise
The more you earn during your career, the higher a benefit you stand to collect in retirement. Therefore, if you’re not making what you should be making at your job, you’ll need to speak up about getting a raise.
Of course, you shouldn’t approach that conversation blindly. Rather, do some research beforehand to understand what folks with your job title are making, and see how your salary compares. If you’re earning well below the average, that’s reason enough to get that data in front of your boss. Additionally, map out a list of ways you add value to your company, whether it’s by maintaining specialized skills or simply going above and beyond on a consistent basis. All of these are arguments in your favor, so don’t hesitate to vocalize them.
The moves you make next year could affect the amount of money you get from Social Security. Avoid the above mistakes, and you’ll be better positioned to maximize your benefits while staying away from unpleasant tax-related surprises.