Starting this January 2023, about 70 million Americans will have an 8.7% increase to their Social Security and Supplemental Security Income (SSI) payments. This is about an average of $140 extra per month.
“Social Security was never intended to be the only form of income for retirees,” said Astyr Wealth advisor Niki Mullinix. “It is important to plan, save and invest for a comfortable retirement especially when we cannot count on annual increases every year. Everyone receiving benefits in 2023 received the 8.7% benefit because of the tremendous amount of inflation which drove this increase, but there have been years when no COLA has been provided.”
With that being said, here are some suggestions on what to do with your extra Social Security income, as well as additional tips on investing and securing other means of income.
Earning Extra Money With Investments
As stated by Niki, retirees should not rely entirely on their Social Security to fund their lifestyle. Retirement investing is a great way to maintain an extra income even after you are no longer working. These retirement accounts are your standard 401(k)s, pensions, traditional IRAs, and more. These accounts are not how you invest, though, they are simply the accounts that you invest through.
Investments that can be made through these accounts include:
- Annuities
- Mutual Funds
- Stocks
- Bonds
- Cash Investments
- Exchange-Traded Funds (ETFs)
- Dividend Reinvestment Plans (DRIPs)
To determine what kind of investment works best for your needs, it is always recommended to consult with a trusted financial team so you can be fully educated on each type of investment.
Ways To Boost Your Social Security Benefits
Social Security benefits can be collected starting at the age of 62, but it would be more beneficial to wait until you reach your official retirement age. For those born between 1943 and 1954, the official retirement age is 66. If you were to claim Social Security benefits before this age, you would receive smaller monthly payments in comparison.
Another way to boost your benefits is to work further after retirement to earn an even higher income. Lastly, married couples can collect additional spousal payments.
Make a Monthly Budget
Even though you’ll be getting more money from your payments, you might not be able to live solely off of your benefits. Therefore, the best thing you can do is make yourself a budget.
Add up all your monthly costs, including rent or mortgage payments, the cost of food, healthcare expenses, debt, and any other living expense.
Next, add up all the income that you’re going to receive monthly.
Finally, determine what your various incomes can cover. For example, how much your Social Security will cover and if any pension will need to cover your expenses.
Put As Much As You Can Into Savings
Covering all your necessary expenses may not leave you with much left, but no matter how much money you have left, it should be added to your savings.
Savings are important, especially in case of emergencies. It’s not a secret that the older you are the more likely your health is to fail you. So at the very least, your savings are important for a health emergency.
Don’t Forget About Taxes
Depending on what your yearly income is, you most likely will have to pay taxes. As an individual filer, you will have to pay taxes on about 50% of your income if your income is $25,000 to $34,000. If you are filing as a couple, you’ll be paying 50% on an income that is $32,000 to $44,000.
Any yearly income higher than this will have up to 85% of your benefits taxable. Anything below that and you don’t owe the IRS anything.
Some states take state taxes out of Social Security income as well. Such states are Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Vermont, Utah, and West Virginia. Your state tax agency can give you more information on this, as each state has different tax rules.
Final Thoughts
If you aren’t sure how to approach your retirement, we would love to help you make a plan. We base our plans on the individual needs and goals of our clients, so you can confidently say that your financial plan works for your lifestyle. Contact us today to learn more.
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