If you’re gearing up to retire in 2024 and contemplating filing for Social Security benefits, it’s crucial to navigate the process with careful consideration.
The decisions you make can significantly impact your monthly payments, and various factors come into play, such as outside income and your place of residence.
Key Tips for Retirees in 2024
In 2024, Social Security recipients can anticipate a 3.2% cost-of-living adjustment (COLA), boosting the average monthly benefit from $1,848 to $1,907, according to the Social Security Administration. To ensure you make informed choices, here are four essential tips for those planning to retire in 2024:
- Federal Income Taxes on Social Security Benefits
Social Security benefits are subject to federal income taxes based on your combined income. Combined income is calculated by adding half of your benefits to your adjusted gross income and nontaxable interest.
Individuals with combined incomes between $25,000 and $34,000 (or $32,000 to $44,000 for joint filers) may be taxed on up to half of their benefits. If your individual combined income exceeds $34,000 or you’re married with more than $44,000, up to 85% of your benefits might be taxable.
- State Taxes on Social Security Benefits
While most states do not tax Social Security benefits, some do. As of 2023, and expected in 2024, the following 11 states tax Social Security benefits: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, and Vermont. It’s essential to note that tax implications vary among states, with some providing reductions based on age or income.
- Timing Matters: Full Retirement Age and Monthly Payments
Eligibility for Social Security begins at age 62, but claiming benefits before your full retirement age results in reduced monthly payments.
For those born in 1960 or later, the full retirement age is 67. Waiting to claim benefits increases your monthly payment — reaching its peak at age 70. Understanding your full retirement age and its impact on payments is crucial for making an informed decision.
- Retirement Earnings Test
If you claim Social Security before reaching full retirement age and continue to work, you may be subject to the retirement earnings test. In 2024, you can earn up to $22,320 without any benefits being withheld.
The test deducts $1 from your benefit payment for every $2 earned above the annual limit if you’re under full retirement age for the entire year.
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Strategic Planning for Social Security
Navigating Social Security in 2024 requires careful consideration of federal and state taxes, understanding your full retirement age, and being mindful of the retirement earnings test.
By staying informed and making strategic decisions, you can maximize your Social Security benefits and ensure a more secure retirement.
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