Making most of Social SecurityWho would have thought that it was going to be Social Security instead of the commune or the millions we made in real estate supporting us Baby Boomers in our old age?

What a bore.

Gallup researchers released a poll last week showing that even though confidence in government is at a low ebb, an increasing number of people nearing retirement plan to rely primarily on Social Security in their old age. About 34% of soon-to-be retirees think Social Security will be their major source of support, up from 25% in 2004.

Some naysayers swear the system will collapse soon under its own weight, but don't forget, there are 77 million Baby Boomers getting old in a crowd – a political heatwave that even the most determined reformers of the program will have trouble shoving aside for years to come.

Fortunately, for those of us Baby Boomers who are going to need those checks, the bureaucrats who run Social Security have supplied a few loopholes that will allow the determined to get a lot more money than grandma managed to eke out. Here are six tips offered by the financial whizzes at U.S. News and World Report and others from the insurance company Prudential.
  1. Embrace your Social Security. Many Boomers will spend 40 years in retirement. In 2010, a 65-year-old worker with $80,000 of final wages and a non-working spouse initially can expect about $30,000 a year from Social Security, indexed for inflation. That's not chump change.
  2. Don't be in a hurry to collect. If you wait until you're 70, you'll double your benefit, compared to what you'll get at age 62.
  3. Consider your spouse. Since passage of the Freedom to Work Act of 2000, a worker can "File and Suspend" Social Security benefits once he or she has reached Full Retirement Age – for most 66. This allows the younger spouse to initially receive 50% spousal benefits based on the older spouse's record, then re-file for 100% of his or her own benefits at full retirement age or older.
  4. Ex-spouses can win too. Former spouses who were married for at least 10 years can collect based on their ex-spouses earnings. But remember, the ex will collect the most when you're dead -- so watch your back.
  5. Calculate the taxes. Intuitively, it seems like it makes the most sense to avoid spending taxable IRA or 401(k) money and rely instead on Social Security supplemented by as little taxable money as possible. In fact, because of the Byzantine way Social Security is taxed, it may be financially advantageous to spend up the taxable money first and delay taking Social Security until age 70, when the amount you and your spouse are entitled to stops increasing. Prudential calculates that individuals with after-tax income up to the mid-$90,000 range can have significant tax savings from delaying Social Security.
  6. Start all over again. If you collected at 62 and decide later that you should have waited, consider paying back the amount you've already received and starting fresh at full retirement age or older. While it might seem like a lot of money, the pay off could be great -- as much as $1,000 a month. And, of course, Social Security is indexed for inflation.

Got a customer service issue you need help with? Jean Chatzky will be on your side! Just email and she'll see what she can do to get your case resolved.

Increase your money and finance knowledge from home

Economics 101

Intro to economics. But fun.

View Course »

Goal Setting

Want to succeed? Then you need goals!

View Course »

TurboTax Articles

Cities with the Lowest Tax Rates

The total amount of tax you pay reaches far beyond what you owe the federal government. Depending on where you live, most likely you're required to pay additional taxes, including property and sales tax. The disparity between the amount of tax you pay in a low-tax city and that in a high-tax city can be dramatic. Living in any of these 10 cities could save you a bundle, although the exact amount may fluctuate based on your income and lifestyle choices.

Cities with the Highest Tax Rates

Much ado is made in the press about federal tax brackets, but cities can carry a tax bite of their own. Even if you live in a state that has no income tax, your city may levy a variety of taxes that could eat away the entire benefit of living in an income tax-free state, including property taxes, sales taxes and auto taxes. Consider all the costs before you move to one of these cities, and understand that rates may change based on your family's income level.

Great Ways to Get Charitable Tax Deductions

Generally, when you give money to a charity, you can use the amount of that donation as a deduction on your tax return. However, not all charities qualify as tax-deductible organizations. While there are many types of charities, they must all meet certain criteria to be classified by the IRS as tax-deductible organizations. There are legitimate tax-deductible organizations in many popular categories, such as those listed below.

A Freelancer's Guide to Taxes

Freelancing certainly has its benefits, but it can result in a few complications come tax time. The Internal Revenue Service considers freelancers to be self-employed, so if you earn income as a freelancer you must file your taxes as a business owner. While you can take additional deductions if you are self-employed, you'll also face additional taxes in the form of the self-employment tax. Here are things to consider as a freelancer when filing your taxes.

Tax Deductions for Voluntary Interest Payments on Student Loans

Most taxpayers who pay interest on student loans can take a tax deduction for the expense ? and you can do this regardless of whether you itemize tax deductions on your return. The rules for claiming the deduction are the same whether the interest payments were required or voluntary.

Add a Comment

*0 / 3000 Character Maximum