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How Does Social Security Work? 5 Things You Should Know About Social Security Benefits

Updated: Dec 15, 2023

an elderly couple standing by the water thinking about social security benefits

During your working years, your income determines how much you can expect to receive in Social Security benefits when you become eligible. For high earners, it's crucial to understand how Social Security works and what to expect regarding their benefits.

What do Social Security taxes look like in 2022?

Every year, the federal government sets a maximum income limit subject to the Social Security tax. In 2022, the Social Security tax limit for high earners is $147,000. Any income earned beyond this limit is not subject to Social Security taxes.

When will your Social Security payments begin?

You have the option to start receiving Social Security benefits when you turn 62, but the amount you receive will be smaller until you reach full retirement age. Full retirement age varies based on the year of birth.

Estimating Social Security Benefits

Consistently high earners can expect to receive more substantial Social Security benefits. In 2022, those who wait until age 70 to collect Social Security can receive a maximum monthly benefit of $4,194. Planning strategically is essential to maximize your benefits based on your earnings history.

Notable Changes to Social Security Benefits in 2022

In 2022, Social Security benefits are receiving a significant increase through a 5.9% cost-of-living adjustment (COLA). This is the most significant benefit increase in decades, offering added financial security during retirement.

Social Security Benefits for Spouses and Dependents

Marital status can significantly influence Social Security benefits for high earners. Spouses may be able to apply for spousal Social Security benefits, entitling them to receive up to 50% of their partner's benefits. Additionally, specific rules apply to divorced or widowed individuals, and children or other dependents may be eligible to inherit Social Security benefits.

Planning Your Retirement with Social Security Benefits

If you are planning retirement, understanding how Social Security works and optimizing your benefits is crucial. Consult with a financial advisor to make informed decisions that align with your retirement goals and maximize your Social Security benefits.

Reach Out for Expert Guidance on How Does Social Security Work and Social Security Benefits

Contact us if you have questions about how your Social Security benefits fit into your retirement plans and goals. Our team of experts is here to provide personalized guidance and help you understand how Social Security works, enabling you to make the most of your benefits for a secure and fulfilling retirement.

Check out this Podcast to learn more about Tax Free Retirement for Entrepreneurs.

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