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3 facts about your social benefits you may not know

Social security benefits can help make retirement much more comfortable, especially if your personal savings are lacking. However, if you do not fully understand how the program works and how your benefits are calculated, you may end up getting less than you expect.

Social Security is complicated and you do not need to understand every detail of how it works. But you should at least know the basics so you can maximize your monthly checks. And you can begin by understanding these three facts.

  Social Security cards stacked on top of one another

Image source: Getty Images

1. You will probably be taxed on your benefits

Yes, it is unfortunate, but true. Even if you have spent your entire career paying for Social Security, you will probably still have to pay taxes for part of your monthly checks.

The most important number to know when it comes to taxes in Social Security is what is called your "total income", which is half the total amount of benefit for the year plus any other pension income you may have. So if you receive $ 20,000 a year from Social Security and additionally have $ 30,000 per year in other income, your total income is $ 10,000 plus $ 30,000.

Here's how much of the benefits you can owe tax on depending on your total income:

Percentage of benefits you owe tax on Combined income for those who file taxes as an individual Combined income for those who marry on filing.
0% Less than $ 25,000 per year Less than $ 32,000 per year
Up to 50% $ 25,000 to $ 34,000 per year $ 32,000 to $ 44,000 per year
Up to 85% More than $ 34,000 per year More than $ 44,000 per year

Source: Social Security Administration.

Remember that this is only for federal taxes; You can also owe state tax on your benefits (even if you live in one of these 37 states, you may be able to avoid paying state taxes). Knowing how much you can expect to pay in retirement can help you plan your financial future.

2. The benefit amount is based on the 35 highest earned years of work

When you calculate the benefit amount, the Social Security Administration takes an average of the 35 years that have the highest earnings in their careers. There are a few other metrics involved in assessing cost of living adjustments, but the higher your overall income, the more you get benefits.

This also means that you can potentially increase your social security benefits if you are strategic. First, make sure you work at least 35 years. If you work less than 35, you will have zeros added to the benefit calculation, which will reduce the average and result in a lower benefit amount. But if you work for more than 35 years, you can replace some of your lower-earning years (probably early in your career) with newer years of higher earnings – raising the average.

If you do not want to work longer than you have to, you can increase your benefit amount by increasing your income. Whether you get an extra job or take on some overtime at work, increased income will also increase your average when it is time to calculate the amount of benefit.

Remember that your benefit may still change depending on the age you decide to start claiming benefits. The basic benefit amount is what you receive if you claim full retirement age, but if you claim before or after that age, you will receive smaller or larger checks.

3. You may be entitled to benefits based on a former spouse's employment record

If you are married, you may be eligible to receive spouse benefits based on the partner's work record. But even if you are divorced, you may still be able to claim benefits based on a spouse protocol – as long as you meet certain eligibility requirements.

First, the marriage must have lasted at least 10 years. Secondly, you should not be married at the moment – even if your spouse has remarried, it will not affect your ability to claim benefits on his or her post. Finally, you must be at least 62 to start claiming benefits. Your ex-spouse must also be eligible to receive benefits, although if he or she is eligible but has not yet applied for them, you can still start claiming your benefits as long as you two have been separated for at least two years.

Even if you are eligible for your own Social Security benefits, you may receive additional checks based on your ex-spouse. SSA will first pay out your benefit amount, so if you are entitled to receive more based on an ex-post, you will receive extra money each month. No matter how much you collect in benefits, it will not affect your spouse's benefit amount.

It is important to understand what types of benefits you are eligible to receive because you may not be notified by SSA. If you do not know what you are entitled to, you may be missing out on extra money.

Social security benefits can earn or ruin your pension, so make the most of them. The more you understand about the types of benefits you are eligible to receive and how much you are entitled to, the better you can plan for retirement.

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