TaxAct Review 2022 – A Powerful Tax Software Solution to Fill Most Needs

Table of Contents
  1. What’s New with TaxAct for 2022?
  2. Why Choose TaxAct to File Your Tax Return?
  3. TaxAct Features and Benefits
    1. Options for Receiving Your Tax Refund with TaxAct
  4. TaxAct Software Versions, Features, and Pricing
    1. TaxAct Free – $0 Federal + $34.95 State
    2. TaxAct Deluxe – $24.95 Federal + $44.95 per State
    3. TaxAct Premier – $34.95 Federal + $44.95 per State
    4. TaxAct Self-Employed – $64.95 + $44.95 per State
  5. Comparing TaxAct Pricing to TurboTax
  6. Should You Use TaxAct to Prepare Your Income Taxes this Year?

TaxAct Review

TaxAct Logo Small
Product Name: Tax Act
Product Description: Tax ReturnPreparation Software
Ease of Use
Navigation
Features
Customer Service
Pricing

Summary

4

TaxAct offers a solid solution for your tax return needs. Improvements for the 2022 calendar year (2021 tax season) include free Xpert Assist included with all programs, including the free version. Additional features include being able to import data from stockbrokers and versions that cover almost any tax need, from a simple tax return up to investors and small business owners. The biggest downside is pricing. Even users of the free tax return will need to pay additional fees to file their state return, something not all tax software programs require. Beyond that, the pricing on federal tax returns is competitive with other major tax software companies.

TaxAct is one of the leading tax preparation software packages available. The service was founded in 1998, and it enables you to prepare all types of returns, regardless of the degree of difficulty.

Small and medium-sized business tax returns are a niche of this product, but they even have a professional edition available for career tax preparers.

What’s New with TaxAct for 2022?

TaxAct is offering two exciting new features for 2022, including offering

free Xpert Assist with all programs. Using Xpert Assist allows users to ask questions from certified CPAs to help them file their tax returns. This can help you avoid costly mistakes and potentially help you save even more money on your tax return. It’s a great tool to use when you’re stuck. Xpert Assist is great for the person who prefers to do their own taxes, but may need a helping hand.

In addition, TaxAct is now also offering TaxAct® Xpert Full Service, which allows customers to hand off all of their tax documents to a CPA and receive a finished product in return. There is an additional cost for

TaxAct® Xpert Full Service, but you won’t have to worry about doing the work yourself.

Why Choose TaxAct to File Your Tax Return?

Like most tax software programs, you can file a free, basic federal tax return with TaxAct (Form 1040A and Form 1040EZ only).

But TaxAct also excels if you have a more complicated tax return, including taxpayers who have income from real estate rentals, investment income, freelancing, consulting, a small business, 1099 income, or similar situations.

TaxAct offers some real advantages that make it well worth investigating:

TaxAct generally costs less than competing packages for federal tax returns. The difference isn’t dramatic, but they tend to be less expensive across the board. And, since your return is guaranteed, you can feel comfortable using software offering the best pricing, so long as it meets your needs.

TaxAct provides free technical support. More common in the industry is to provide library-type content, where you can look up specific tax questions in the database. But, given that most people don’t prepare taxes for a living, being able to talk to a live person can be reassuring. It’s especially comforting if you’re preparing taxes online for the first time.

Each version comes with unlimited phone and email support, not just the more expensive versions.

TaxAct comes with a Price Lock Guarantee. You will get the price for the plan you select, regardless of when you actually file your return. Lock in your price now, and it will be good until you file your tax return. This is an important feature since many tax prep plans increase their prices closer to April 15. Purchase TaxAct now to ensure that doesn’t happen.

TaxAct pledges an Accuracy Guarantee. TaxAct Alerts inspects your return for errors and omissions that could increase your chance of being audited. It also finds opportunities for tax saving you may have missed.

TaxAct offers Tax Refund Status tracking. When you file online, they provide you with easy access to track when your e-filed tax return has been received by the IRS, as well as the anticipated date of your refund. Here is a screenshot of the TaxAct tax refund status tool. It’s easy to use: simply enter your information, click enter, and TaxAct will give you a status update on your tax refund.

TaxAct Features and Benefits

Some of the additional features and benefits provided by TaxAct include:

  • TaxTutor Guidance. This tool provides easy-to-follow, expert tax tips and strategies. They will help provide the biggest money-saving deductions.
  • TaxAct Bookmarks. This tool enables you to mark a spot in your Questions & Answers so you can return to that section anytime you like.
  • FAFSA Assistance. Got a student in the family who will need to apply for a government loan or assistance? TaxAct’s FAFSA Assistance can help with that. It enables you to prepare and print a worksheet with the tax information needed to obtain federal financial aid.
  • Complete Tax Glossary. You can get definitions for almost 300 tax terms, linked directly from the TaxAct interview process anytime you need them.
  • Personalized Healthcare and Tax Reports. This tool enables you to maximize future tax and healthcare savings with personal strategies and tips.
  • Personalized Financial BluPrint. This is a complimentary financial report provided after you file your return. It provides financial planning and tax-saving opportunities based on the information in your tax return.
  • Tax Extensions. You can use TaxAct to file a free tax deadline extension (learn more about tax deadline extensions).
  • Audit Defense. In partnership with Protection Plus, TaxAct offers a full-service Audit Defense service you can choose to enroll in when filing federal and state returns. Your tax return is also covered for three years and backed with a $100,000 Accuracy Guarantee.

Options for Receiving Your Tax Refund with TaxAct

Tax filers who use TaxAct can choose to receive their tax refund via direct deposit to their bank account, or via a check from the IRS. You can also apply your refund to future tax payments.

Finally, tax filers can choose to receive their tax refund on an American Express Serve Prepaid debit card. The latter is a good option for those who do not have access to a bank and want to avoid paying check-cashing fees.

TaxAct Software Versions, Features, and Pricing

Like other popular tax software programs, TaxAct offers several different versions.

No matter which version you choose, all TaxAct products come with free account support, a maximum refund guarantee, 7 years of access to your return, easy W-2 import, a personalized BluPrint financial assessment, and a $100,000 accuracy guarantee.

TaxAct Free – $0 Federal + $34.95 State

The free version enables you to file either 1040 EZ or 1040A forms at no cost to you.

This version is of course only for the simplest tax returns, including retirement income and unemployment income. But, it provides all the basic preparation options available with premium versions, such as the preparation, printing, and e-filing of your return.

Users can conveniently import prior-year tax return information. This software unlimited tax specialist support.

You will be kept apprised of your refund or the amount due as you prepare your tax return.

TaxAct Deluxe – $24.95 Federal + $44.95 per State

The Deluxe+ Version is suited for moderately complicated returns, including those who itemize tax deductions, own a home, have student loan interest, or take advantage of certain tax credits or adjustments.

This software includes all features of TaxAct’s Basic version, along with a few more bells and whistles.

Filers can easily import personal data from last year’s tax return and even prior years information from TurboTax and H&R Block.* In addition, you can track charitable donations with Donation Assistant and receive FAFSA Assistance.

It also enables you to monitor refund amount updates in real-time while preparing your tax return online. Unlike the other versions, unlimited tax specialist support via phone is provided.

*Note about changing tax software programs: most top-tier tax software programs can import your previous tax returns, even if you are using a different software program. However, some companies may charge a fee to import previous tax returns.

That said, it’s a good idea to maintain copies of your tax records for at least 7 years. These tips are helpful for organizing your tax paperwork.

TaxAct Premier – $34.95 Federal + $44.95 per State

This version, highly recommended by TaxAct itself, is perfect for filers with investment income expenses or rental property.

In fact, Premier is one of the most reasonably priced plans for owners of rental properties among all tax prep services.

Unlike the other versions, Premier+ includes access to a dedicated phone line, along with screen share capabilities.

TaxAct Self-Employed – $64.95 + $44.95 per State

This is the TaxAct plan for the self-employed, including freelancers, independent contractors, and small business owners. It’s even an excellent plan for investors. Essentially, TaxAct Self-Employed includes all features of the Premier software, and then some.

Self-Employed also comes with the Deduction Maximizer tool. It’s a simple tool designed specifically for the self-employed, enabling one to take advantage of the deductions most commonly claimed by those in your line of business.

Unlike the other versions, filers would also have access to year-round tax support and planning, along with detailed guidance on reporting business and farming income.

This includes filing Form 1040, Schedule C (sole proprietor), Form 1065 (partnership or LLC), Form 1120 (C Corporation), or Form 1120S (S corporation) for your business, as well as your individual 1040.

Comparing TaxAct Pricing to TurboTax

Software Version TaxAct TurboTax
Free
Simple filers, dependents, unemployment, and retirement.
$0.00
File Free
$0.00
Most Popular
Deluxe
Homeowners, deductions, credits, and adjustments.
$24.95
Start for Free
$39.00
Save 36% with TaxAct.
Premier
Investments, home sale, and rental property.
$34.95
Start for Free
$69.00
Save 49% with TaxAct.
Self Employed
Freelancers, contractors, and small business owners.
$64.95
Start for Free
$89.00
Save 27% with TaxAct.
TaxAct and TurboTax federal tax return pricing comparison

TaxAct Pros & Cons

Pros

  • Federal Tax Returns are competitively priced compared to other major tax software programs
  • All options, including TaxAct Free, include free Xpert Assist
  • TaxAct Xpert Full Service is available for an additional fee.
  • Ability to import csv data files from stockbrokers
  • Cryptocurrency support
  • TaxAct has different versions to cover virtually any tax need, from a basic tax return, to investors, to small business owners.

Cons

  • State tax returns are more expensive than some tax software providers, especially for TaxAct Free
  • The experience is not as user-friendly with TaxAct as it is with some competitors.

Should You Use TaxAct to Prepare Your Income Taxes this Year?

TaxAct

The major advantage of using TaxAct is that the plans cost less than comparable tax preparation programs.

TaxAct’s plans fulfill virtually the same services as more expensive providers, just at a lower cost. TaxAct may have fewer bells and whistles than other plans, though, and is not as user-friendly as some competitors.

For example, TurboTax integrates with QuickBooks Self-Employed, while TaxAct has no equivalent offering.

But, for most people in most tax-filing situations, TaxAct will enable you to get the job done and do it at a minimal cost.

For those interested, TaxAct’s Tax Calculator, Tax Bracket Calculator, and Self-Employment Calculator are free, easy-to-use online tools to take advantage of in preparation for tax season.

To learn more or to purchase software, visit TaxAct’s website.

TaxAct

  • Full Service Tax Software
  • All plans offer free Xpert Assist
  • TaxAct Xpert Full Service available for an extra fee

The post TaxAct Review 2022 – A Powerful Tax Software Solution to Fill Most Needs appeared first on Cash Money Life | Personal Finance, Investing, & Career.



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H&R Block Review 2022 – H&R Block Simplifies the Tax Return Process

Table of Contents
  1. Tax Preparation Software is Powerful & Accurate Enough for Most Tax Situations
  2. How to File Your Tax Return Online with H&R Block
    1. Starting Your Tax Return with H&R Block
    2. Importing W-2 and 1099 Forms Directly From Providers
    3. Start, Stop, & Save Your Progress
    4. Use Tax Calculators and Check Progress as You Go
    5. H&R Block Can Handle Changing Tax Situations
  3. H&R Block – File Federal Taxes Free Online
  4. H&R Block Online Versions:
    1. H&R Block Free Online
    2. H&R Block Deluxe
    3. H&R Block Premium
    4. H&R Block Self-Employed
  5. H&R Block Pros & Cons
  6. H&R Block – A Winning Tax Solution

H&R Block Review

H&R Block Logo
Product Name: H&R Block
Product Description: Tax Return Software
Ease of Use
Navigation
Features
Customer Service
Pricing

Summary

4.6

H&R Block is one of the most trusted tax services in the U.S. Their online software is among the highest-rated tax software programs. In addition, H&R Block also offers physical locations where you can meet with a live tax return professional. If you prefer to DIY, the online tax software program is the way to go, whether you have a simple tax return, or a more advanced return. Live help is also available for online users, with an additional fee.

I frequently go on record saying, “I don’t mind paying taxes—I just wish they weren’t so complicated!” And I mean every word of that. I understand the important role tax revenues play in our local, state, and national governments. But the actual process of completing our tax return gets more complicated each year. Did you know, for example, the US tax code is over 70,000 pages long, and growing each year? TaxFoundation.org puts the US tax code and regulations at over 10,000,000 words.

This is far too complicated for the average American taxpayer to keep up with. Thankfully, you don’t have to be an expert to do your taxes.

H&R Block - Taxes Won

While it’s a good idea to keep abreast of the major tax code changes each year, such as retirement account contribution limits (e.g. 401k and IRA), exemptions, deductions, and other major changes, you don’t need to be a tax expert to do your tax return. Because in all likelihood, you can leverage the expertise of others—either by

  • paying a tax professional to do them for you (more expensive), or
  • by using tax software to handle your own taxes (more economical, and the best solution for the average tax situation).

Tax Preparation Software is Powerful & Accurate Enough for Most Tax Situations

It impresses me that tax software providers such as H&R Block have been able to interpret the millions of words in the tax code and wrap them into a software program that is easy enough to use that it can be done online with a smartphone or tablet. And each year the process is refined further.

You should be able to use tax preparation software to quickly and accurately complete your tax return. There are some exceptions, of course. You may consider hiring a tax professional if you have a very specialized or complicated tax situation that requires very specific professional advice. But don’t resign yourself to paying hundreds of dollars to have a tax pro do your return until you look into your situation more closely. You may be able to use the help section or online Q&A from an online tax software website to complete your return on your own.

Even though the tax code becomes longer and more complex each year, the tax software solutions become more powerful and advanced. Even better, many companies, like H&R Block, offer a maximum refund guarantee and audit support.

How to File Your Tax Return Online with H&R Block

File Taxes Online

Filing a tax return with H&R Block is easy. Just visit their site, sign up, and start your return. You can begin your tax return for FREE. And depending on your needs, you may be able to complete and file your tax return for free. Some forms may require a more specialized version of H&R Block and may require payment. We’ll cover the different H&R Block versions later in the article.

Starting Your Tax Return with H&R Block

H&R Block uses an intuitive interface to walk you through the tax return process. They present you with a series of interview-style questions and calculate your return as you go. You can actually see how different actions change your tax return, such as exemptions, deductions, retirement contributions, and more.

Importing W-2 and 1099 Forms Directly From Providers

Depending on your situation, you may not even need to own a scanner. H&R Block makes it easy to automatically import your W-2 and 1099 forms from many different providers. Simply enter your employer’s EIN and the H&R Block online software will let your know if you can directly import your W-2. The process is similar for 1099 forms (again, available from select partners).

If your employer isn’t supported by the auto-import feature, you can simply take a picture of your W2 with your phone or tablet and import it directly into your tax return. Their software then pulls all the information directly from the photo and imports it into your tax return. This is much faster than manually typing, and eliminates possible errors when typing in your information.

Start, Stop, & Save Your Progress

You don’t have to finish your taxes in one session, even when filing online. I always try to gather all my forms in one place and get everything ready to go before I start my return. But it’s not uncommon for me to forget a form or have to look something up before I am able to complete my tax return. Thankfully, you can save your progress as you go, and pick up where you left off.

Use Tax Calculators and Check Progress as You Go

H&R Block has a great online tax calculator you can use without having to start a tax return. This is a great tool for getting a rough estimate of your tax obligation (or potential refund). If you do start a return with H&R Block, you will be able to see your progress as you go.

Try the H&R Block Tax Calculator. This free tool helps you easily estimate your refund or how much you’ll owe in taxes. Give the H&R Block Tax Calculator a Test Run.

H&R Block Can Handle Changing Tax Situations

Your tax situation this year may be different than it was the previous year. That’s OK. H&R Block can handle a variety of situations that may impact your tax return, such as getting married, having children, starting a new career, moving to a new state, serving in the military, and much more. The intuitive tax return process makes sure you don’t miss anything—even if it’s something you may not have been aware of.

H&R Block – File Federal Taxes Free Online

If you haven’t yet filed your taxes, I recommend checking out H&R Block’s online software. Their solution offers a variety of features, including the ability to file a simple federal return online for free. Here are some additional features and the H&R Block online versions.

H&R Block Online Offers the Following Features:

  • W2 snap & easy to import: Take a pic of your W2 from your smart device (new feature).
  • It’s easier than ever to switch to H&R Block Online – with drag and drop you can import a PDF of last year’s return from any other tax prep service.
  • Refund Reveal™ shows how and why your refund changed
  • Free EITC: EITC is now free on any H&R Block Online product
  • Mobile: Improved flow and usability on mobile apps

H&R Block Online Versions:

H&R Block offers several versions of its popular tax return software:

H&R Block Free Online

H&R Block Free Online includes the following features:

  • Simple returns
  • Students
  • Unemployment income
  • W-2 employees
  • Child Tax Credit (CTC)

H&R Block Online – FREE ONLINE – Best for new filers or simple tax returns

H&R Block Deluxe

H&R Block Deluxe includes the following features:
  • HSA contributors
  • Child and dependent care expenses
  • Itemize deductions

H&R Block Online – DELUXE – Best for homeowners and deductions

H&R Block Premium

H&R BlockPremium includes the following features:
  • Rental income
  • Investments
  • Sold cryptocurrency

H&R Block Online – PREMIUM – Best for investors

H&R Block Self-Employed

H&R Block Self-EMployed includes the following features:
  • Contractors, gig workers, and other self-employed work
  • Asset depreciation
  • Vehicle and home office expenses

H&R Block Online – SELF-EMPLOYED – Best for small business owners

H&R Block Pros & Cons

Pros

  • Easy to use interface with guided questions to make your tax return a breeze.
  • Additional support available
  • Easy to upload tax documents – just take a picture and upload
  • Competitive Pricing

Cons

  • Limited integrations with third-party programs
  • Some features and additional support cost extra

H&R Block – A Winning Tax Solution

Taxes can be complex. But filing your return doesn’t have to be difficult. You can leverage the years of experience and knowledge H&R Block brings to the table, and complete your tax return with relative ease. And the best part? Not only is your return guaranteed, but you can get started right now, for free.

Start Your Tax Return for Free with H&R Block

Read our complete tax guide here if you have any more questions or concerns about anything to do with taxes. 

H&R Block

  • Easy to use software
  • Max Refund Guarantee
  • Help from live tax agent available (additional fee)

The post H&R Block Review 2022 – H&R Block Simplifies the Tax Return Process appeared first on Cash Money Life | Personal Finance, Investing, & Career.



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Social Security Retirement Benefits Guide & Frequently Asked Retirement Questions

Table of Contents
  1. How to Register for Social Security Benefits Online
    1. 1. Check Your Eligibility
    2. 2. Gather Personal Information and Paperwork
    3. 3. Log on to the SSA.gov Website
    4. 4. All About You
    5. 5. Earning history
    6. 6. Verify Form Completion and E-Sign
    7. 7. Additional Security
  2. How to Read Your Social Security Statement
    1. What to Look For on Your Social Security Statement
  3. When Should You Receive Social Security Benefits?
    1. How Much Money Can You Expect from Social Security?
    2. When are You Eligible for Social Security Benefits?
    3. Full Social Security Retirement Age
    4. Penalty for Taking Social Security Benefits Before Full Retirement Age
    5. Increase Social Security Retirement Benefits by Waiting to Draw Your Pay
    6. Military Service Can Increase Your Social Security Benefits
    7. Can You Take Social Security Benefits While Working?
  4. Divorce and Social Security Benefits
    1. Qualifications for Benefits After Divorce
    2. When You Can Begin Collecting
    3. Survivor Benefits
    4. Social Security and Fairness
  5. Social Security Survivor Benefits for Children
    1. What are the requirements for children to get Social Security benefits?
    2. The amount of benefits your children can expect to receive
    3. How long you can expect benefits to continue?
    4. You can also get benefits for the care of a child
  6. Will Social Security Go Bankrupt?
    1. The Popular Reduced Social Security Assumptions
    2. Why that’s not likely to happen
    3. A more likely outcome
    4. How to Prepare for the Possibility of Reduced Social Security Retirement Benefits
  7. Where Can I Get More Information?

Social Security is one of the cornerstones of many retirement plans. In fact, it can provide up to 50% or more of retirement income for many Americans. Social Security is earned by contributions you make to your Social Security Account while you are in the workforce and applies to most workers in the United States.

Social Security can be complex, and it comes in three flavors: Retirement Benefits, Disability Benefits, and Survivor Benefits. The purpose of this guide is to show you how you can qualify for Social Security Retirement Benefits, how to avoid reduced payments, and how you can actually increase your Social Security Benefits by waiting to begin drawing your retirement pay.

Social Security Retirement Benefits Guide

This guide will walk you through your Social Security Retirement Benefits and help you understand the following:

How to Register for Social Security Benefits Online

Registering for your Social Security benefits when you retire may seem about as appealing as an anesthetic-free root canal. You may have images in your head of endless paperwork and headaches.

But the truth is, registration is surprisingly easy, particularly online. Here are the steps you will need to register for Social Security retirement benefits—and it shouldn’t take you more than 15 to 30 minutes:

1. Check Your Eligibility

Register for Social Security Benefits Online

Before you do anything else, you will want to double-check that you are, indeed, eligible for benefits. You would hate to get all the way through the registration process before you discovered that fact.

To keep that from happening, Social Security offers the Benefit Eligibility Screening Tool (BEST) to help you determine your eligibility status.

This tool is anonymous, requiring neither your name nor your Social Security number.

2. Gather Personal Information and Paperwork

Before you sit down at the computer to complete the online form, find all of the pertinent documents you will need to complete the process.

These documents include your birth certificate (or naturalization papers if you were not born in the United States), your Social Security card, W-2 or self-employment forms for the last year, U.S. military discharge records, and your most recent Social Security statement.

3. Log on to the SSA.gov Website

On the Social Security homepage ssa.gov, click on the hyperlink titled “Apply online for retirement benefits” located in the top left corner. On the next page, you will click on the button “Apply for Retirement.”

4. All About You

You will fill in information about yourself, including name, address, date of birth, and Social Security number. The application will also prompt you to give your employer’s name and address, and recent income information.

Previous online enrollment forms required military veterans to provide their dates of military service for verification purposes. However, I am a military veteran and did not have to do this when I enrolled online.

Once you provide that information, you are taken to a page that attempts to verify your identity by asking questions about loans that you might have or may have previously had.

This is part of the verification process, so you want to make sure you have accurate and up to date information about your credit history, past addresses and phone numbers, and other relevant information. I keep a list in a file of my previous addresses and phone numbers.

You can verify certain other information from credit reports. You can sign up for a free Credit Karma account, which lists your credit report, including the dates you opened and closed certain credit cards, auto loans, mortgages, and other loans. This came in handy when I opened my SSA Online account.

Get Your Free Credit Score

5. Earning history

Your most recent Social Security statement provides you with information about your earnings over your lifetime. The application asks for details about this information, but even if you do not have your statement, don’t worry. You can fill out the application without it and the Social Security Administration can help you fill in any omitted information when they process your form.

6. Verify Form Completion and E-Sign

Once you have completed your form, you will be asked to click on the “Sign Now” button, which serves as your electronic signature. Once you have completed the form, print it out and keep a copy for your records.

7. Additional Security

You will need to provide either a phone number or email account. the Social Security Administration uses dual-factor authentication, which requires you to provide a code each time you access to your account. You can choose to receive this code via email or text message. This is an excellent security measure and makes it much more difficult for identity thieves to access your Social Security account.

You can also opt-in to additional security measures by checking a box when creating your account. The Social Security Administration will mail you a letter with an upgrade code and additional instructions for further securing your account. You can also change your security settings within your account. You must also regularly update your password every 180 days.

Social Security Online Registration

How to Read Your Social Security Statement

how to read your social security statement

Every year, the Social Security Administration issues you a statement, containing information about your earnings and your benefits. In previous years this statement was mailed to your home. The SSA now only publishes this in your online account. It’s a good idea to review this information, to ensure that it is correct, as well as to ensure that your identity hasn’t been stolen.

If you want to look at your Social Security statement online (and you should), you need to sign up for an account.

What to Look For on Your Social Security Statement

Once you have access to your Social Security statement, look at the information. Verify that your personal information is accurate. You’ll want to have inaccurate information corrected.

Also, look at your earnings history. If your earnings are too low for some years, you might not get the benefits you are entitled to. Your Social Security benefits, for you, or to your survivors should you die, are related to your earnings. If there has been a mistake related to under-reported earnings, you’ll need to fix that so that you have the proper benefits.

Be on the lookout for earnings that are too high as well. In these cases, it could be an indication that someone has used your Social Security number to get a job. While it’s a nice thought that you will get all those extra benefits, the downside is that your identity has likely been stolen. Reporting the matter could lead to helping you lock down your credit file.

You can call the Social Security Administration at 1-800-772-1213 if you want to correct information on your Social Security statement. The sooner you fix mistakes on your statement, and in the records the government has, the better off you’ll be. It’s much better to resolve these issues now, before you actually need your Social Security benefits.

When Should You Receive Social Security Benefits?

One of the best ways to ensure that you have a good safety net during retirement is to maximize when you take Social Security benefits. The decision about when to take Social Security benefits depends on your financial situation, though. How much money you receive is based on how long you have been working (and paying into the system), as well as when you decide to start taking benefits.

The longer you work, and the longer you wait to begin taking benefits, the higher your monthly payments will be. However, if you have lost your job, and can’t find a new one, Social Security benefits might be necessary to help keep you afloat.

How Much Money Can You Expect from Social Security?

According to the Social Security website, the average retiree earned $1,658.03 per month as of December 2021. That comes out to $19,896.36 per year. While almost $20,000 per year is a decent amount of income, it may or may not be enough to cover your financial needs. As shown in the charts below, waiting to take your Social Security check will increase your benefit amount.

When are You Eligible for Social Security Benefits?

When should you take Social Security Benefits?

First of all, you need to figure out when you are eligible for Social Security benefits. If you are disabled in some way, you can begin receiving Social Security benefits no matter your age. However, you will have to prove your disability. Your benefits will be considered Social Security disability benefits until you reach your full retirement age. At that point, your disability benefits are converted to retirement benefits.

Full Social Security Retirement Age

Year of Birth * Full Retirement Age
1937 or earlier 65
1938 65 and 2 months
1939 65 and 4 months
1940 65 and 6 months
1941 65 and 8 months
1942 65 and 10 months
1943--1954 66
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 and later 67

If you aren’t disabled, the earliest age you can begin receiving Social Security benefits is age 62. However, it’s important that you understand that you won’t qualify for “full” benefits. If you start taking benefits before you reach what is considered the “full” retirement age, you end up with reduced benefits. Your full retirement age depends on when you were born. The Social Security Administration (SSA) offers a web site that can point you to your full retirement age. For people born after 1960, though, the retirement age is currently 67. You can find more information about how your benefits are reduced by consulting the benefits chart provided by the SSA.

Penalty for Taking Social Security Benefits Before Full Retirement Age

The previous table shows your full retirement age. You may be able to take Social Security Retirement Benefits before your full retirement age, starting at age 62. However, there may be penalties if you begin receiving benefits before your full retirement age. The following table shows the reduced benefit for taking benefits early. Note, you must be at least age 62 for the entire month before you begin drawing Social Security:

Year of Birth *1. Full (normal) Retirement Age Months between age 62 and full retirement age *2. The retirement benefit is reduced by *4. The spouse's benefit is reduced by *5.
1937 or earlier 65 36 20.00% 25.00%
1938 65 and 2 months 38 20.83% 25.83%
1939 65 and 4 months 40 21.67% 26.67%
1940 65 and 6 months 42 22.50% 27.50%
1941 65 and 8 months 44 23.33% 28.33%
1942 65 and 10 months 46 24.17% 29.17%
1943-1954 66 48 25.00% 30.00%
1955 66 and 2 months 50 25.83% 30.83%
1956 66 and 4 months 52 26.67% 31.67%
1957 66 and 6 months 54 27.50% 32.50%
1958 66 and 8 months 56 28.33% 33.33%
1959 66 and 10 months 58 29.17% 34.17%
1960 and later 67 60 30.00% 35.00%
  1. If you were born on January 1st, you should refer to the previous year.
  2. If you were born on the 1st of the month, we figure your benefit (and your full retirement age) as if your birthday was in the previous month. If you were born on January 1st, we figure your benefit (and your full retirement age) as if your birthday was in December of the previous year.
  3. You must be at least 62 for the entire month to receive benefits.
  4. Percentages are approximate due to rounding.
  5. The maximum benefit for the spouse is 50% of the benefit the worker would receive at full retirement age. The % reduction for the spouse should be applied after the automatic 50% reduction. Percentages are approximate due to rounding.

(table source).

Increase Social Security Retirement Benefits by Waiting to Draw Your Pay

You can also improve your monthly Social Security benefit by waiting longer to take your Social Security benefits. If you wait until you are beyond your full retirement age, you will receive an additional 8% for each year until you are 70. There is a double advantage to waiting as well, since if you keep working you can pay more into the system and increase your benefit that way. The higher your monthly benefit, the less you have to rely on your own nest egg to cover your expenses.

Military Service Can Increase Your Social Security Benefits

You may be able to increase your Social Security Benefits if you had military service prior to 2001. Veterans who served between September 16, 1940, through December 31, 1956, did not have Social Security taxes automatically withheld from their military paychecks. However, the government will credit veterans with earnings of $160 for each month they served during those years.

Military service between 1957 and 2001 may also increase your Social Security Benefits. Here is how your military service impacts it:

  • Military Service between 1957 and 1967 you’ll receive extra credits when you apply for Social Security.
  • Military Service between 1968 and 2001 these credits have been added to your record.
  • Military Service after 2001 does not earn extra credits.

The following article explains in more detail how your military service impacts your Social Security Benefits.

Can You Take Social Security Benefits While Working?

It is possible to start receiving Social Security benefits while you are working. However, you might be subject to a cap. As you reach a certain amount of benefits while you have a job, you have to give back half of every dollar you receive in benefits — and this rule applies even after full retirement age. It is rarely worth it to start taking your Social Security benefits while you are working. However, if you have had your hours cut to part-time, and you are at least 62, you might need some benefits to help you through the wage reduction.

Also, remember that you can start taking money penalty-free from your tax-advantaged retirement account at age 59 1/2. That means that you might be able to supplement with those benefits until you reach full retirement age. Before you make a decision about drawing your Social Security benefits, consider your financial situation, and your cash flow. Only take Social Security benefits before your full retirement age if you have to.

Divorce and Social Security Benefits

When a marriage dissolves, it can leave one or both spouses scrambling to find their financial footing, particularly when it comes to retirement planning. Retirement can be a particularly difficult prospect for a divorcing spouse who stayed home with children or otherwise sacrificed a career during the marriage.

However, what many divorcées may not realize is that they can still be eligible for their spouse’s higher Social Security benefits even after the marriage has ended. Here is what you need to know about your spousal Social Security rights, whether or not you are still married:

Qualifications for Benefits After Divorce

divorce social security benefits

In order to qualify for spousal benefits, you need to meet four requirements:

  • Your marriage must have lasted at least 10 years.
  • You must personally not have remarried, although it does not matter if your ex-spouse has. In fact, the spousal benefits you collect will not affect the benefits your ex or his/her new spouse are entitled to.
  • You must have reached age 62 or older.
  • Your benefits based upon your own earnings must be lower than the benefits you would collect based upon your former spouse’s earnings.

If you have remarried, it is possible to collect benefits based on your former spouse’s earning record if your second marriage ends in death, divorce, or annulment.

When You Can Begin Collecting

Suppose you need financial help as of age 62, but you know that your ex-spouse has no plans to retire in the next decade. It is still possible for you to collect retirement benefits based on his earnings, even if he is still working. As long as your ex-spouse would qualify for benefits, you can begin collecting against his earnings as of your 62nd birthday.

There is only one caveat to this rule: you must have been divorced at least two years before you can collect benefits if your ex-spouse has not yet applied for retirement benefits himself.

In addition, it is possible for you to collect spousal benefits while putting off receiving your own retirement benefits, which you never lose the right to. David McPherson of ABC News recommends this strategy as a method to increase your own benefits over time:

“You…can begin by collecting Social Security through a divorced spouse benefit first and delay receiving your own retirement benefits until a later date. This could mean a higher benefit for you down the road by qualifying for delayed retirement credits that accumulate up until age 70.”

Survivor Benefits

One last right to spousal benefits that you retain even through a divorce is your eligibility for survivor benefits if your ex-spouse dies. In the case of survivor benefits, you are eligible to receive them once you have reached age 60 (or 50, if you are disabled). You may also be eligible prior to that if you still have a child living at home.

Social Security and Fairness

Basically, individuals are eligible for the highest benefit to which they are entitled, which includes benefits accrued by a spouse during a long-term marriage. Social Security recognizes that not all of the contributions to a working marriage are financial. This means that spouses who give up working outside the home or working full time for the sake of a marriage that eventually ends will not find themselves up a creek in retirement.

Social Security Survivor Benefits for Children

One of the biggest concerns that all parents have is the care of their children in the event of their death. Your death will certainly cause deep emotional issues for your children, but the good news is that you can get financial help from the Social Security Administration in the care of your children as a result of your death.

Social Security survivor benefits for minor children

The benefits will be available on a monthly basis to whoever the appointed caregiver of your children will be, for the purpose of providing for the needs of the children. Given that we normally think in terms of Social Security as being an old age retirement benefit, the fact that it will also pay benefits for your children in the event of your death comes as both a surprise and a bonus to many people.

But the benefit is there, and you should do some investigating to determine eligibility as well as the amount of benefits before there is actually a need. Just knowing that the benefits are there can go a long way toward easing your mind about the care of your children following your death. When combined with the proceeds of a life insurance policy, your children should be well provided for in the unfortunate event of your death.

What are the requirements for children to get Social Security benefits?

To be eligible to receive Social Security benefits, a child must be your natural, adopted or dependent stepchild.

More specifically, to get benefits a child must have (according to the Social Security Administration):

  • A parent(s) who is disabled or retired and entitled to Social Security benefits; or
  • A parent who died after having worked long enough in a job where he or she paid Social Security taxes.

The child must also be:

  • Unmarried
  • Younger than age 18
  • 18-19 years old and a full-time student but no higher than grade 12
  • 18 or older and disabled, and the disability must have started before age 22 (more on that in a bit)

The paperwork requirements to establish a claim include (but are not limited to):

  • Your child’s birth certificate
  • Your’s and your spouse’s Social Security numbers
  • For survivors benefits, proof of the parent’s death
  • For disability benefits, medical evidence to prove the disability
  • Other documentation as required by the Administration

The amount of benefits your children can expect to receive

Unless you are already receiving Social Security income – upon which your children’s benefits will be based – this part can be complicated, particularly if you’re looking for a projection.

A child’s benefit may be up to half of the parent’s retirement or disability benefit, or as much as 75% of the deceased parent’s basic Social Security benefit.

The maximum benefit per family is limited to between 150% and 180% of the parent’s full benefit amount. In the event that the monthly benefit should exceed this percentage, the amount of the benefit paid for each child will be reduced proportionally. Naturally, this limit will be more of a problem if you have more than two children, as the total benefit cannot exceed the benefit ceiling regardless of the number of children that need to be provided for.

If you are simply looking to do a projection of the benefits your children may be entitled to upon your death, you’ll have to first get an estimate of what your own Social Security benefit will be at retirement. The Social Security Administration (SSA) provides a tool to help you do that on their Retirement Estimator webpage. There are a number of steps you will need to go through in order to get your estimate, but it will give you an approximation of how much you can expect to receive in retirement, and a base from which to estimate the benefits your children will receive in the event of your death.

How long you can expect benefits to continue?

Social Security benefits for children stop when a child reaches the age of 18, and the SSA will inform the surviving parent or guardian of the termination of benefits three months before the child turns 18.

There are of course exceptions to termination of benefits at age 18:

If the child is still a student – Benefits will continue as long as the child is a full-time student enrolled in either an elementary or high school. Upon turning 18 the child will have to complete a statement of attendance certified by the school he or she is attending. The benefits will terminate at the earlier of graduation from high school, or attaining the age of 19 and two months.

IMPORTANT: The extension of benefits past age 18 does not apply to a child attending college.

Disability – In the event the child is disabled, benefits will continue past age 18, as long as the disability began before the child turns 22. Presumably, the benefit will be converted to a long-term disability claim if the child is permanently disabled, but each situation is determined on a case-by-case basis.

You can also get benefits for the care of a child

You can also get benefits if you are caring for a child who is receiving Social Security benefits. Your benefits will end when the child turns 16, unless the child is disabled. Benefits can extend past the child’s 16th birthday if you “exercise parental control and responsibility for a mentally disabled child or perform personal services for a child who is disabled”.

In the event that the child is disabled, the disability must be confirmed before the child turns 16. SSA will notify you of the termination of benefits just before the child turns 16, and then you must make application for a continuation of benefits based on the child’s disability.

You can get more information about Social Security benefits for your children at SSA Publication No. 05-10085.

Will Social Security Go Bankrupt?

The Social-Security-is-going-bankrupt claim is one that we are hearing often these days. There’s a grain of truth to it – which will delve into in a bit – but most of it is sensationalist drivel. There is no question that it makes for great attention-grabbing headlines, and probably plays well into the hands of the retirement planning industry.

But a lot of people are worrying needlessly about this potential outcome. What are the myths – what are the facts? And more important, how can we prepare for whatever will come about?

Social Security is Bankrupt Myth

At the extreme, a Social Security nuclear nightmare is set to unfold at an unknown point in the future. The checks will stop going out each month, then the White House, Congress, and the Social Security Administration will be forced to finally come out and publicly admit that the system is bankrupt.

The elderly will be kicked out of their homes to live on the streets, or – if they’re lucky – with their children. They’ll be wearing 30 year old, threadbare clothing, and dinner will be a can of pet food.

That scenario is the product of a mix of political gamesmanship and media sensationalism. And it works extremely well for all the players in the game. For example, in order for a politician to claim that he is “working tirelessly to save Social Security for our beloved elderly Americans”, he first needs to establish the fact that someone else is looking to take it away. It gets votes, and it gets people reading articles and watching TV programs. Mission accomplished!

If you are buying into this, you’re most likely wasting energy and valuable time.

Why that’s not likely to happen

A big part of the reason why Social-Security-is-going-bankrupt is so popular is the fact that so many people rely upon it so heavily. America’s senior citizens count on Social Security to provide 39% of their total income, and the majority of retirees rely on it to provide more than half their income. Talk of the system becoming history creates powerful negative emotions.

But that dependence on the system is also precisely why it can’t go away. Not only do so many people count on Social Security now, but most of us hope and expect to have it in the future. That represents a political force that will make “bankruptcy” extremely unlikely.

Another important fact is that Social Security is an integral part of the US economic and financial systems. It is, in fact, one of the foundational systems in the country. The end of Social Security would not just imperil retirees, but would also hurt millions of businesses that would suddenly lose tens of millions of customers who would then be too poor to buy their products and services. And that’s not to mention the banks, would no longer have reason to expect repayment on loans made to anyone over the age of 62.

But beyond political and economic considerations, the US government has too many options to allowing Social Security to go bankrupt. Just as it is doing now, the government can either raise taxes, or borrow or print the money needed to keep Social Security solvent. The bankruptcy of Social Security is impossible absent the complete collapse of the US government.

Just based on history, that’s not impossible either, but it’s far less likely.

A more likely outcome

Taking the nightmare scenario off the table, there is no question that Social Security has its problems. There are now too many people collecting benefits relative to workers paying taxes into the system. That will have to be addressed in some fashion going forward.

Three scenarios that we should fully expect to come about are:

  1. An increase in the retirement age,
  2. A reduction in benefits, or
  3. Some combination of both.

We’re actually already seeing the implementation of an increase in the full retirement age from 65 to 67 for people born after World War II. It is entirely possible that the age will be increased further, even up to age 70. And it is not unlikely that early retirement – currently age 62 – will also be increased.

Reduction in benefits can come about simply by the Social Security Administration adjusting its benefit calculation. Since the calculation is only loosely available to the public, gradual adjustments would be fairly easy to accomplish. Most likely, we’ll see a combination of an increase in the retirement age, as well as reductions in benefits.

That combination – and not the complete bankruptcy of Social Security – is the scenario that we should all be preparing for.

How to Prepare for the Possibility of Reduced Social Security Retirement Benefits

Just being aware that Social Security is likely to be less generous by the time we retire should be a sufficient wake-up call for us to make other plans. We can continue to plan to have Social Security as one source of income in retirement, but it is unquestionable that we need to be prepared to rely upon it far less than current retirees do.

How can we begin preparing for that now?

Live on less, save more. This is Personal Finance 101 – live on less, save more, and invest the difference. It’s the single best strategy for preparing for retirement matter what happens with Social Security. By living beneath your means, you not only prepare yourself for a more frugal retirement, but you also enable yourself to save more money for that retirement.

Delay collecting Social Security benefits. With regard to Social Security itself, you can increase your monthly benefit by up to 8% each year that you delay retirement. If your normal retirement age is 67, and you delay collecting benefits until age 70, you can increase your monthly benefit by as much as 24%.

Maximize your retirement contributions. The single most important preparation for lower Social Security benefits is increasing the size of your retirement portfolio. There are different ways that you can do this. Most people are completely unaware that you can contribute as much as $54,000 per year to various retirement plans. Among the options are maximizing your 401(k) contributions at work, opening an IRA or Roth IRA, or even starting a side business with its own dedicated retirement plan.

Get out of debt. You should plan to enter retirement in a debt-free position. By paying off debts, you also eliminate monthly payments, and that lowers your cost of living.

Where Can I Get More Information?

The best place to start is the Social Security Administration website at ssa.gov. They have a helpful FAQ section with over 200 common questions and answers.

You can also call the Social Security helpline at 1-800-325-0778. Finally, you can visit your local Social Security office (SSA office locator). Office hours are normally Monday-Friday from 7 am – 7 pm.

The following writers contributed to this guide: Kevin Mercadante, Emily Guy Birken, and Miranda Marquit.

The post Social Security Retirement Benefits Guide & Frequently Asked Retirement Questions appeared first on Cash Money Life | Personal Finance, Investing, & Career.



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