As the economy continues to evolve, individuals nearing retirement may want to reassess their Social Security strategy. Recent tax changes implemented by the Trump administration could have a significant impact on your benefits. Here’s how you can claim Social Security now and make the most of this tax break.
For those approaching retirement, maximizing Social Security benefits is crucial for securing a comfortable financial future. With the recent changes in the tax code, claiming Social Security benefits strategically can be even more beneficial. By understanding these changes, you can make informed decisions to boost your benefits.
Understanding the Social Security Tax Break
The Bipartisan Budget Act of 2015 changed the way Social Security benefits are taxed. Before this change, benefits costing more than 85% of an individual’s income were taxable. Now, up to 85% of benefits are taxable, regardless of income.
This change affects not only current recipients but also those who plan to claim benefits soon. Individuals with higher income might have previously chosen to delay taking benefits to avoid taxes. However, with the new rule, taking benefits earlier might be a smarter move.
Claiming Social Security Now vs Deferred Benefits
Claiming Social Security early often results in smaller payouts, as each month is deducted from your benefits. Conversely, delaying benefits usually means higher payouts later on. With the tax break, the equation has changed. If you’re older and making a high income, taking benefits early could be a savvy move–but it depends on factors like your age, income, and health.
Consider factors such as your life expectancy, expenses, and income projections when deciding whether to claim early or wait. In some cases, claiming benefits before your full retirement might be a better financial option while avoiding taxes.
