Reports by the trustees of the Social Security program indicate that Americans may experience a reduction of up to 27% in their Social Security benefits over the next ten years. This projection is due to the depletion of the Social Security trust fund, which is estimated to occur by 2033, a year earlier than initially estimated.
Strategies to Minimize the Impact of the Reduction
To reduce the potential impact of the projected reduction in Social Security benefits, financial experts suggest several strategies. One such tactic is delaying the collection of benefits until reaching full retirement age or later, which can result in an 8% increase in the monthly benefit amount for each year of delay, according to Yahoo Finance.
Another strategy is for the lower-earning spouse in a marriage to begin claiming benefits at 62, while the higher-earning spouse delays claiming benefits until full retirement age or later, allowing the household to have a source of income while accruing Delayed Retirement Credits.
It is important to note that these strategies may not be suitable for everyone, as factors such as health and financial need should be taken into account. For this reason, working with a financial advisor or retirement specialist is highly recommended. Additionally, the depletion of the Social Security trust fund may be impacted by political decisions that have yet to be made.
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Reducing the Impact of Taxation on Social Security Benefits
Those with other taxable sources of income may also be subject to federal income tax on their Social Security benefits. To reduce the impact of taxation, one option is to convert traditional IRA or 401(k) funds to a Roth IRA.
This can minimize the amount of Social Security benefits subject to tax. However, it is essential to consider individual circumstances before making this decision, and consulting a financial advisor or tax specialist is highly recommended.
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