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Generating lifetime income before you start receiving Social Security

Although many financial advisors stress building up your net worth before you enter into retirement, the reality is that reliable, ongoing income is what can make for a successful and secure financial future.

There are many ways to generate retirement income. These can include Social Security, an employer-sponsored pension, interest and/or dividends from personal investments, a reverse mortgage, and/or a personal annuity.

While some of these income sources can be dictated by the stock market or interest rates in the economy, others – like Social Security and cash flow from a fixed annuity – are not. In fact, both of these can provide you with income for the remainder of your lifetime, no matter how long that may be.

But if you retire “early” – such as before you are eligible to file for Social Security benefits – can you still receive ongoing lifetime income?

The answer here is yes. However, there may be a few caveats that you’ll need to be aware of that could impact your taxes and other factors related to how much you’ll actually have available to spend.

Understanding Social Security Retirement Income Benefits

If you qualify for Social Security retirement benefits, you can receive a steady income for the remainder of your lifetime. If you wait until your full retirement age (FRA), you can receive the full amount of your benefit.

For many years, the FRA for all eligible workers was 65. However, the full retirement age is now between age 65 and 67, depending on the year of your birth. You can, however, start receiving Social Security at age 62.

If you opt to go this route, the dollar amount of your benefit payments will permanently be reduced (even after you have reached your full retirement age) – although you could end up receiving the benefits for a longer period of time versus if you had waited.

Social Security Full Retirement Age

Year of BirthMinimum Retirement Age for Full Benefits
1937 or before65
193865 + 2 months
193965 + 4 months
194065 + 6 months
194165 + 8 months
194265 + 10 months
1943 to 195466
195566 + 2 months
195666 + 4 months
195766 + 6 months
195866 + 8 months
195966 + 10 months
1960 or later67

Source: Social Security Administration

In some cases, Social Security retirement benefits may be taxable. This is true if you are receiving Social Security before your full retirement age, and you are also receiving income from various other sources.

For instance, you may be taxed on Social Security if:

– You file a federal tax return as an individual and your combined income is:

  • Between $25,000 and $34,000 (up to 50% of your benefits may be taxable)
  • More than $34,000 (up to 85% of your benefits may be taxable)

– You file a joint tax return, and you and your spouse have a combined income that is:

  • Between $32,000 and $44,000 (up to 50% of your benefits may be taxable)
  • More than $44,000 (up to 85% of your benefits may be taxable)

– You are married, and you file a separate tax return.

Your combined income equals your adjusted gross income plus any non-taxable interest earned, plus one-half of your Social Security benefits.

Coordinating Your Social Security with Other Retirement Income Sources

It is common for retirees of any age to receive income from more than just one source. This being the case, it is essential that you coordinate these cash flow streams – which includes knowing whether or not they may be taxable and/or cause “early withdrawal” penalties.

Having an experienced retirement income planner on your side can help. At Annuity Gator, we focus on helping people plan their retirement cash flow strategy so that taxes and penalties are minimized (or even eliminated) and net income is as high as possible.

If you would like to see what is possible for you in terms of generating retirement income, based on your intended retirement age, feel free to contact the specialists at Annuity Gator by calling (888) 440-2468 or by sending us an email using our secure online contact form. We look forward to meeting you.

Generating Lifetime Income Before You Start Receiving Social Security

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