Finding solutions for today's significant retirement planning issues should be a focus on as individuals work to build financial wealth. Take a close look at the financial aspects of retirement planning. When should an individual retire? How does delaying retirement affect the future and present? The solution is to work with a trusted, comprehensive financial advisor. Take a look at a few common retirement planning issues commonly experienced.
Retirement Age
The age at which a person retires will affect them in several ways. Normal wage earning diminishes at this point, meaning that they do not have the same level of income coming in. This is also the time when people begin to draw Social Security. But, take note that the laws have changed and the age at which a person retires will be dependent on their birth year. To find the specifics, visit the Social Security Administration's website. When one reaches retirement age, they become capable of receiving full benefits from Social Security. Those born after 1960, can begin to see full benefits at age of 67, for example.
Early Retirement
Early retirement is another factor to address with financial planning. If someone retires prior to the full retirement age listed at the Social Security Administration's website, they may qualify for early retirement. This allows them to take partial payments from Social Security. Specifically, once they hit the age of 62, they are eligible for reduced benefits until they obtain your normal retirement age, as listed above.
Retirement Earnings Test
Prior to April 7th, 2000, individuals who worked during their retirement had to pay back some of the funds they received from the Social Security payments they were obtaining during retirement. This changed at that time and now, you are free to work, without penalty during your retirement, after you reach the age of full retirement. Those who are 65 to 69, for example, are able to go back to work and earn an income without facing penalty. Prior to that time, of every $3 earned, $1 had to have repayment to the government. Do note, in early retirement, individuals are still limited by how much they can earn.
Delaying Your Retirement
Perhaps a person does not want to start collecting Social Security for some time after their retirement age. As mentioned, those who retire early have a reduction in their payments. The same holds true for those who retire later. If retiring later, payments will be higher. The amount received in benefits checks is dependent on the amount of money earned over a lifetime covered by Social Security. Note, though, that there is no boost in the benefits if an individual works past the age of 70.
Taxable Benefits
In some situations, where the Social Security recipient has income, as well as are receiving benefits checks, the benefits may be subject to income tax. The higher the income is, the higher the tax on these benefits will be as well.
What is the solution to any of these issues regarding retirement planning? Primarily, know what the rules are and how they affect the individual, personally, based on the current Social Security laws and IRS laws. Second, collaborate with a team of professional financial advisors to help determine the right way to handle these issues.
References:
Social Security Online, Social Security Administration, http://www.ssa.gov/
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