Before you retire, you should consider setting up a large equity line. It is best to do this before retirement while you still have a steady income. This equity line can provide you with a reserve source of funds that may be needed for such purposes as unforeseen medical costs, major home repairs, etc. The line provides cash to cover short-term needs. So, obtain a line as large as the bank will provide. Remember, an equity line is a loan against the equity in your home that allows you to borrow and repay the loan as often as needed.
Do not forget about the ever-increasing costs of health insurance premiums and out-of-pocket medical costs. If you retire before becoming eligible for Medicare at age 65, this can have a substantial impact on your finances. You should estimate this cost before retiring.
If you are under full retirement age when you start drawing Social Security benefits, your benefit will be reduced by $1 for each $2 you earn above the annual limit. In the year you reach full retirement age, your benefits will be reduced $1 for each $3 you earn above the annual limit. To find this year’s limits, please see the list provided on our website under Resources titled “Annual Updated Tax Numbers” for this and other limits, thresholds, and rates that change annually. Starting with the month you reach full retirement age, there is no reduction in benefits based on earnings.
Depending on your filing status and income levels up to 85% of your benefits may be taxable. For additional information, to apply for and/or calculate your benefits, etc., visit the Social Security Administration's website at www.ssa.gov.
In determining when to start drawing Social Security (SS), there are several factors to consider. Drawing SS early results in a permanent reduced monthly benefit. Other sources of earned income exceeding annual threshold limits will also reduce your monthly benefits. Once full retirement age is attained, there is no reduction in benefits based on earnings. Another factor to consider is the taxation of the benefits. A portion of SS benefits become taxable if your total income exceeds the base amount for your filing status. Based on these factors, you may not realize any benefit from drawing early because of the reduced benefits received for drawing early, earned income limits and potential taxation of the benefits. On the other hand, drawing SS early may be advantageous in your situation because it may allow you to receive benefits that are tax free and defer drawing retirement out of other plans that are growing tax free. When trying to determine when to begin drawing your benefits, you should consider these factors as well as your life expectancy. If you need assistance in evaluating your options, please give us a call. For additional information, to apply for and/or calculate your benefits, etc., visit the Social Security Administration's website at www.ssa.gov.