1. Qualify for Retirement Benefits
You must work to earn credits toward retirement benefits in the USA. If you were born after 1929, you are required to earn 40 credits, which typically takes 10 years of employment and payment of social security taxes. As of 2008, you earn one credit for every $1,050 in qualified earnings for the year, up to a maximum of four credits for $4,200 earned. You only earn credits on social security taxable income, not interest, capital gains or other income. While you can earn more than 40 credits during your lifetime of work, you don't get additional benefits. However, the more you work, the more your monthly income will be upon retirement.
2. Receive Retirement Benefits
About 3 months before you are ready to retire, you need to fill out the benefit application forms with the Social Security office on paper or online. You can retire as early as age 62, but you will receive lower payments. If you were born between 1943 and 1955, you can receive full benefits by waiting until you are 66 to retire. The retirement age increases by 2 months for those born before 1960 and is currently 67 for those born after 1960. Monthly checks are mailed out upon retirement and are based on the average yearly income you earned before retirement
3. Understand Income Taxes on Retirement Benefits
If you file your taxes as an individual and earn a total income between $25,000 and $34,000, you may owe income taxes on up to 50 percent of the retirement benefits you receive. If you make over $34,000, you may have to pay taxes on up to 85 percent of the benefits. If you file a joint return, a total household income of $32,000 to $44,000 will require taxes on 50 percent of the benefit. This increases to 85 percent if you earn more than $44,000 a year. The Social Security office sends out yearly statements in the form of a SSA-1099 for income tax reporting.
4. Understand Medicare Benefits
Several months before you turn 65, you need to fill out the forms to receive Medicare benefits, which will start once you turn 65. For the most part, Medicare covers 80 percent of medical-related expenses after deductibles are met. Most retirees purchase supplemental medical insurance plans to cover the difference between what they owe for medical bills and what Medicare pays.
Medicare Part A covers expenses related to hospitalization and some follow-up care. Part B coverage is for almost all non-hospital-related medical expenses, not including prescription drugs. Medicare Part C, known as Medicare Advantage, allows you to pool the coverage of Part A and Part B into one service provider. Additional benefits of Medicare Advantage are choosing a preferred provider organization (PPO) plan, managed care plan, private fee-for-service plan or another specialty plan. Medicare Part D was created to provide assistance with prescription drugs for a monthly fee.
Member Comments