The end of the year is the perfect time to ensure your finances are in order and your retirement preparation is on track.
For millions of older adults, Social Security will play a significant role in retirement. In fact, nearly 90% of retired Americans say that Social Security is either a major or minor source of income, according to a 2022 poll from Gallup.
Even if you're still years away from retirement, it's wise to start preparing now. And there are three simple Social Security moves that can make it easier to plan for the future.
1. Check your future benefit amount online
You don't have to wait until retirement to see how much you'll receive from Social Security. Once you qualify for benefits (meaning you've worked and paid Social Security taxes for at least 10 years), you can check your estimated benefit amount online.
To do this, you'll first need to create a mySocialSecurity account. From there, you can check your statements and see an estimate of your future benefit amount based on your real earnings.
Keep in mind that this number will likely change between now and retirement, especially if your income shifts substantially. It may be a good idea, then, to get into the habit of checking your benefit amount annually to get a more accurate estimate.
2. Think about the age at which to begin claiming benefits
The age at which you file for benefits will have an enormous effect on the amount you collect each month. The earliest you can file is age 62, but the longer you wait (up to age 70), the higher your monthly payments will be.
To collect the full benefit amount you're entitled to (or the amount you see on your statements when you check your benefits online), you'll need to wait until your full retirement age (FRA) to begin claiming. Your exact FRA will depend on the year you were born, but it will fall somewhere between ages 66 and 67.
There's no right or wrong answer as to when you should claim, but when you know how your age will affect your benefit amount, this decision will be easier to make.
3. Determine whether your savings are on track
When you know approximately how much you'll receive from Social Security and how your age will affect your payments, it will be easier to gauge whether your savings are on track.
For example, say your full benefit amount is $1,800 per month, but you plan to claim at age 62, which will reduce your benefits by 30%. That will leave you with $1,260 per month, or around $15,120 per year.
If you expect to need, say, $50,000 per year in retirement income, around $35,000 per year will need to come from sources other than Social Security. If your savings are off track, now is the time to give them a boost.
Preparing for retirement in 2023
While you can make these moves any time of year, the end of the year is a particularly good opportunity. If you haven't maxed out your 401(k) or IRA yet, now is your last chance to reach those annual limits.
It's also the time to start setting goals and budgeting for 2023. One of the easiest ways to save more for retirement is to make it a priority in your budget and set aside a certain amount of money each month. By setting a savings goal now, you can head into 2023 as prepared as possible.
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