Planning your retirement can be one of the most anxiety-inducing tasks you ever take on. You may not think you have saved enough to retire, or you may not be sure that the strategies you’re employing are going to get the best results. You also may not be sure how different laws are going to affect the way you plan. The key lies in being informed and aware and getting the legal help you may need in advance. Below are a few issues to think about.
How You Can Help Maximize Your Social Security Benefits
You can take many steps that will go a long way toward helping you maximize your Social Security retirement benefits. You can use a combination of some of the following strategies, some of which have eligibility requirements:
- Work for at least 35 years. Your Social Security benefits are calculated based on your 35 highest-earning years. Working for at least 35 years ensures that lower-earning years (or years with no income) don’t reduce your average.
- Delay claiming benefits until full retirement age or later. You can start receiving Social Security benefits as early as age 62, but waiting until your full retirement age (which varies depending on your birth year) or even delaying until age 70 can significantly increase your monthly benefit.
- Consider spousal benefits. If you’re married, you may be eligible for spousal benefits, which can be up to 50% of your spouse’s benefit. That can be particularly beneficial if one of you has a significantly lower earnings record.
- Keep working during retirement. If you continue to work after you start receiving Social Security, you can increase your benefits, especially if your current earnings are higher than in previous years. Doing this can replace lower-earning years in your benefit calculation.
- Regularly check for errors and understand tax implications. Make sure your earnings record is accurate and understand how your benefits may be taxed. Keeping track of these details can help you plan more effectively for retirement.
You should note that the Social Security Administration (SSA) periodically increases Social Security benefits as part of a cost-of-living adjustment (COLA), which adjusts for rising prices or inflation. In 2023, Social Security and Supplemental Security Income (SSI) beneficiaries received an 8.7% COLA, raising the estimated average monthly benefit for retired workers to $1,827 in 2023.
Retirement Strategies That Can Make a Difference
It’s important to have a diverse investment portfolio as part of your retirement strategy if possible. Think about spreading your investments across different asset classes like stocks, bonds, and real estate. That way, you can balance your risk with your return, which can lead to more consistent growth over time. Any trustworthy investment expert will tell you to tailor your investment approach to your risk tolerance and retirement timeline, making a gradual shift towards more conservative investments the closer you get to retirement age.
Of course, taxes also factor into your retirement planning. Retirement accounts like 401(k)s and IRAs have distinct tax implications. Traditional accounts often offer tax-deferred growth, which means you pay taxes when you withdraw from them. On the other hand, Roth accounts provide tax-free growth because you contribute to them post-tax. When you know about these differences, you can strategize withdrawals during your retirement to minimize your tax liability. You also help yourself by staying aware of potential tax deductions and credits available for you as a retiree. These can include an increased standard deduction and filing threshold, medical expense deductions, and the elderly or disabled tax credit.
Finally, estate planning can be another critical element. Planning your estate is about ensuring that your assets are distributed according to your wishes. It’s an ideal way to provide some sense of financial security for your heirs. That’s why it’s important to create a will, set up trusts, and plan your estate with the tax implications of inheritance in mind. You also may want to work through decisions about your end-of-life care and powers of attorney. That way, you can protect your interests in case you’re unable to make decisions yourself. Because this kind of process can be overwhelming, it can help to get guidance from an experienced estate planning attorney.
Legal Aspects of Retirement
The more informed you are about legislation that affects retirement planning, the more strategically you’ll be able to act as you plan your retirement. Doing something as simple as setting up a Google news alert for “retirement planning legislation” can yield lots of information on what laws will affect your strategy.
There seem to be changes virtually every year. For example, at the start of 2022, Congress included updates to the Setting Every Community Up for Retirement (SECURE) Act. The bill requires most employers to automatically enroll employees in their retirement plan at a rate of at least 3%. It also increases the age-required minimum distributions (RMDs) starting from 72 to 73 in 2023 and then to 75 by 2033. The bill has also established an enhanced catch-up contribution for people between 60 and 63 that lets you make a catch-up contribution equal to the greater of $10,000 or 150% of the standard catch-up contribution, starting in 2025. Finally, companies will be able to earn tax breaks by making matching retirement plan contributions for employees who are paying down their student loans.
Getting the help of an experienced estate planning lawyer can be key to how you plan your retirement. Your estate attorney can help you and your family set up wills, trusts, and college funds, as well as distribute property. Essentially, estate lawyers ensure that your financials are in order in case of a life-changing event or death. At times, estate lawyers act as executors of a will, making sure that all entities get what they’re entitled to in the event of the death of you or your spouse.
Get In Touch With an Estate Planning Attorney
For advice on Social Security strategy, retirement planning, and the accompanying legal issues in Washington, you should reach out to the elder law attorneys at Legacy Law Group in Eastern Washington, Spokane Valley, and Spokane itself. Contact us at (509) 315-8087 today to get started.