Today TaxMama® hears from Stephen in the TaxQuips Forum who has a sensible (though late) question. “In the current economy, raises are hard to come by. I haven’t had a raise in several years. I am 64 1/2 planning on a full retirement at age 66. Can I volunteer to pay more into Social Security so that my benefit will rise? Is there a way to calculate if it would be worthwhile to do so in the first place?”
That’s an excellent question. After all, there are ways to buy extra years or increases in benefits in some government or school district pensions. But not Social Security.
If you were self-employed, you could reduce your expenses and raise your profits. Unfortunately, you would be apt to raise your income taxes as well as your Social Security/Medicare contributions.
Also if you’re self-employed, there is a way to pay in extra if your profits were less than $4,851 but at least $400 for the last several years. You could use Part II of the Schedule SE, to pay just the extra self-employment taxes to ensure you have enough quarters to qualify for benefits. But if your wages are already higher than $4,851…you cannot use this method to increase your benefits.
Essentially, the only way I know to increase your SS benefits at this stage? Start a business – make a profit and pay taxes on those profits. Incidentally, you can start the business after your retire. If your profits are higher than your wages in some of the last 10 years, you’ll raise your SS benefits. Otherwise, I don’t know that you’ll get much extra benefit.
Maybe someone else has a better idea?
Of course, since you cannot increase your SS contributions, consider increasing your contributions to your company’s retirement plan, if there is one. If not, there are always IRAs. Start contributing as much as you can towards your own retirement savings. Find an investment that is both conservative and has long-term growth. Any company that is well-managed, ethical and caters to the growing senior population is likely to be a safe bet for long-term growth.
And remember, you can find answers to all kinds of questions about retirement and other tax issues, free. Where? Where else? At www.TaxMama.com.[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]
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