Many Americans are facing tough choices with regard to their retirement plans. The average life expectancy is increasing, and the cost of essentials like food and health care is rising. Many Americans are understandably concerned about outliving their money, and the solution is often to retire later than originally expected.
If you’re thinking of working past age 65, this plan can indeed help you to build a bigger retirement savings, pay down debt, and claim a larger Social Security benefits check. But you should definitely watch out for three potential problems if you decide upon a later retirement.
Social Security may be withheld. If you decide to keep working beyond your full retirement age (between 65 and 67, depending upon your year of birth), your future benefits checks can increase by about 8 percent for each year that you continue working. But you can run into a potential problem if you decide to claim your benefits while you’re still working, and before you reach full retirement age. Depending upon your income, Social Security may withhold part or all of your payments for as long as you work. Each situation is different, but it may be best to wait on claiming your Social Security benefits until after you reach your full retirement age.
Your Medicare premiums may increase. If you have employer-provided health insurance, you may think you don’t need to sign up for Medicare as long as you’re still working. But if you wait beyond your intitial enrollment period, you could face a 10 percent increase in Part B premiums for each year that you are eligible but don’t claim benefits.
You can apply for Medicare benefits during the three months prior to your 65th birthday, and for four months afterward. Remember to enroll in Medicare, even if you don’t think you need it.
Watch out for penalties. You’re required to begin taking minimum distributions from your retirement account by age 70 ½. Otherwise you could face steep tax penalties to the tune of 50 percent. Speaking of retirement plans, eligibility for tax deductions on contributions ends at age 70 ½.
This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
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