Many seniors are entrepreneurs that keep working, perhaps on a niche business or a side hustle. But many entrepreneurs also may be retired and take social security as either all or part of their income. If a part of your income is supplemented by social security payouts, it’s worth knowing how this income can be negatively affected by life circumstances…
Although there are a few reasons you can receive social security benefits, when you think of social security, you probably think of the receiving benefits during your retirement.
Approximately 97% of people, aged 60-89 receive social security currently, or will receive it in their lifetime. Social security is important to seniors, so important that a whopping 1 in 4 recipients report social security as being 90% of their income. For this reason, it’s important to know the factors that can negatively affect your social security payouts, both pre and post-retirement, so you can make sure you are getting the most out of your social security benefits.
If you are nearing retirement age and are planning for your financial future, here are 5 factors that can impact the amount of social security you will receive.
1. Government Debt
A social security offset occurs when you owe money to the government, such as failing to repay a government-funded loan. If the amount you owe to the government is not paid by the time you retire and claim your benefits, the government will apply the offset amount to your benefits, reducing the amount of money you receive.
A social security offset can greatly impact your retirement, especially if social security makes up the majority of your income.
2. Retirement Age
Social security benefits are calculated based on a number of factors, one of those factors being your retirement age. While you can typically retire and claim your benefits at age 62, you can also choose to cash in as late as age 70. The longer you wait, the higher your payment will be because the more you will have paid into your social security benefits.
This is definitely something to consider when planning for retirement.
3. Pre-Retirement Income
Your SS benefits are a percentage of what you earned in the 35, highest-earning years of your work history. Every paycheck, a percentage of your wage is deducted from your earnings and put towards your social security benefits, meaning the income you earned during those 35 years, determines the payout you will receive during your retirement.
4. Post-Retirement Income
While you can work post-retirement and take a social security drawing, the income you earn may impact the payment you receive. If you retire early, you can only earn a certain amount of money post-retirement before your social security payouts are affected. The good news is, once you reach full retirement age, your post-retirement earnings will no longer negatively affect your social security payouts,
5. Location
The state you live in, work in, and retire in can be a determining factor in how much you receive for your social security benefits. Some states apply an additional federal SSI benefit to your payouts, which means you will receive more benefits simply by living in that state. You can check with your state, or the government to see if your state supplements the federal SSI benefit.
These are the factors that affect your social security payouts. Knowing the factors that affect your social security payouts is important because it allows you to make the changes you need to make to ensure your payout is as high as possible. Even as an entrepreneur, take these factors into consideration before retiring and claiming your social security benefits.
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