D You Can Stop Working And Not Begin Receiving Your Retirement Benefits
We calculate your benefits based on your highest 35 years of earnings. If you stop working before you have 35 years of earnings, or you have low earnings for some years, this will affect your benefit calculation. However, if you wait to start benefits after you reach full retirement age, your benefits will increase for each month you do not receive them until you reach age 70. There is no incentive to delay filing for your benefits after age 70.
If you are not receiving your Social Security benefits when you turn 65, you will need to apply for Original Medicare three months before you turn 65. If you dont sign up for Medicare Part B when youre first eligible at age 65, you may have to pay a late enrollment penalty for as long as you have Medicare coverage.
How Your Age Affects Your Benefit Amount
The age you file for Social Security is perhaps the most important factor influencing your benefit amount.
Age 62 is the earliest you can begin claiming, or you could file at any age thereafter. Your full retirement age is the age at which you’ll receive the full benefit amount you’re entitled to based on your career earnings. For those born in 1960 or later, your FRA is 67 years old.
Your Retirement Age And When You Stop Working
Your retirement age is the age you begin receiving Social Security retirement benefits. For many people, this is not the same age youll stop working.
The age you stop working can affect the amount of your Social Security retirement benefits. We base your retirement benefit on your highest 35 years of earnings and the age you start receiving benefits.
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Real Life Is More Complicated
The above is a very simplified example of how the way the IRS calculates taxes on Social Security benefits can have a big effect on your tax bill if you claim those benefits early.
In real life, you may have more wiggle room to keep your combined income low. If you have funds in a Roth IRA, withdrawals from that account won’t count toward combined income. If you sell stocks in a taxable account, the principal value doesn’t count toward your combined income. And if you end up selling some investments for a loss, you’ll be able to deduct at least some of that from your combined income as well.
There are plenty of strategies to employ to reduce your tax bill in retirement if you plan ahead. But claiming Social Security benefits early can limit your ability to plan for taxes long term.
The $18,984 Social Security bonus most retirees completely overlook
If you’re like most Americans, you’re a few years behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $18,984 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. Simply click here to discover how to learn more about these strategies.
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If your combined income exceeds a certain threshold, a portion of your Social Security benefits become taxable. Here’s how it breaks down.
Table by author. Data source: Social Security Administration.
Yes, those thresholds are very low. That’s because they haven’t been adjusted in almost 40 years. So, it behooves you to minimize your combined income. One way to do that is by drawing a bigger portion of your total income from the part where only half counts toward the equation: Social Security.
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A You Can Continue Working And Start Receiving Your Retirement Benefits
If you start your benefits before your full retirement age, your benefits are reduced a fraction of a percent for each month before your full retirement age.
You can get Social Security retirement benefits and work at the same time before your full retirement age. However your benefits will be reduced if you earn more than the yearly earnings limits.
After you reach your full retirement age, we will recalculate your benefit amount to give you credit for any months you did not receive a benefit because of your earnings. We will send you a letter that explains any increase in your benefit amount.
If you delay filing for your benefits until after full retirement age, you will be eligible for delayed retirement credits that would increase your monthly benefit. If you also continue to work, you will be able to receive your full retirement benefits and any increase resulting from your additional earnings when we recalculate your benefits. Once you reach full retirement age, your earnings do not affect your benefit amount.
If you start receiving retirement benefits before age 65, you are automatically enrolled in Original Medicare when you turn 65. If you or your spouse are still working and covered under an employer-provided group health plan, talk to the personnel office before signing up for Medicare Part B. To learn more, read our Medicare publication.
Why Did The Full Retirement Age Change
Full retirement age, also called “normal retirement age,” was 65 for many years. In 1983, Congress passed a law to gradually raise the age because people are living longer and are generally healthier in older age.
The law raised the full retirement age beginning with people born in 1938 or later. The retirement age gradually increases by a few months for every birth year, until it reaches 67 for people born in 1960 and later.
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If You Were Born Between 1943 And 1954 Your Full Retirement Age Is 66
If you start receiving benefits at age 66 you get 100 percent of your monthly benefit. If you delay receiving retirement benefits until after your full retirement age, your monthly benefit continues to increase.
The chart below explains how delayed retirement affects your benefit. The increase is based on your date of birth and the number of months you delay the start of your retirement benefits. If you start receiving retirement benefits at age:
- 67, you’ll get 108 percent of the monthly benefit because you delayed getting benefits for 12 months.
- 70, you’ll get 132 percent of the monthly benefit because you delayed getting benefits for 48 months.
When you reach age 70, your monthly benefit stops increasing even if you continue to delay taking benefits.
Benefits For Your Divorced Spouse
If you are divorced, your ex-spouse can receive benefits based on your record if:
- Your marriage lasted 10 years or longer.
- Your ex-spouse is unmarried.
- Your ex-spouse is age 62 or older.
- The benefit that your ex-spouse is entitled to receive based on their own work is less than the benefit they would receive based on your work.
- You are entitled to Social Security retirement or disability benefits.
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What Is My Full Retirement Age
Full retirement age for future beneficiaries will fall between the ages of 66 and 67. This is the age at which you can expect a full, unreduced benefit from Social Security. If you delay filing for benefits until after your full retirement age, you can expect a benefits increase of up to 8% per year until you reach age 70.
How Much Social Security Will I Get If I Retire At 63
Monthly Social Security payments are reduced if you sign up at age 63, but by less than if you claim payments at age 62. A worker eligible for $1,000 monthly at age 66 would get $800 per month at age 63, a 20% pay cut. If your full retirement age is 67, you will get 25% less by signing up at age 63.
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How Full Retirement Age Impacts Your Social Security Benefits
When you claim Social Security benefits earlybefore your full retirement ageyour total monthly benefit is decreased by a small percentage of your PIA for each month until your full retirement age. Conversely when you delay claiming benefits until after your full retirement age, it boosts your monthly benefit payment by a small percentage of your PIAup to the year you turn 70.
Your Social Security benefit is reduced by around half a percent for each month between the date when you claim benefits early and your full retirement age. At the very most, you could see a reduction of up to 30% of your PIA by claiming benefits before reaching full retirement age. A PIA of $2,000, for example, could be cut to $1,400 if you take your benefit as soon as you are eligible, rather than waiting for full retirement age.
On the other hand, delaying Social Security benefits until after your full retirement age could garner you a larger monthly benefit.
For every month after full retirement age, you add two-thirds of 1% per month up until you attain age 70, says Carroll. This means an increase of up to 8% per year that you delay taking benefits between full retirement age and age 70. For a beneficiary with a full retirement age of 66 and 6 months, a PIA of $2,000 could be increased to $2,600 by waiting to take benefits until age 70.
Social Security disability benefits do not have any specific retirement age, since disability can strike at any age.
Should You Collect Social Security Early
As you can see from the table above, if you wait and collect Social Security at age 66 in 2022, you will get 100% of the benefits you are eligible for.
However, if you start collecting at the earliest age of 62, your benefits will be permanently reduced between 20-25% depending on when you were born.
Also, if you wait until 67, youll get 108 percent of the monthly benefit because you delayed getting benefits for 12 months.
Additionally, if you wait until age 70, youll get 132 percent of the monthly benefit because you delayed getting benefits for 48 months.
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What If I Change My Mind
If you receive Social Security benefits at a reduced rate but then change your mind, you have the option of withdrawing your application within the first 12 months of receiving benefits and paying back to the government what you’ve already received . Then, you could restart benefits at a later date to take advantage of a higher payout. Be aware that you’re limited to one withdrawal per lifetime.
For example, let’s say you elected to receive early benefits at age 62 but then decided to go back to work at age 63. You could withdraw your Social Security application, pay back the years’ worth of benefits you received, go back to work, and then wait until your full retirement age to restart your benefit checks at a higher level.
Once you reach full retirement age, another option is to voluntarily stop benefits at any point before age 70 to receive delayed retirement credits . Benefits will automatically restart at age 70 at a higher amountâunless you choose to start taking benefits before then. Note that when you withdraw your application or stop your benefits after full retirement age, you must specify if your Medicare coverageâif you have itâshould be included in the withdrawal.
Can I Work After Full Retirement Age
Beneficiaries are free to continue working while taking their Social Security benefits, no matter what age they start taking those benefits. However, working and taking Social Security benefits before reaching full retirement age may affect your benefits.
If you start taking Social Security early but keep working, youre subject to whats called an earnings test. For every $2 you earn over $18,960, you will see $1 withheld in Social Security benefits. And in the year you reach full retirement age, this limit changes to $1 in benefits for every $3 you earn above $50,520 up to the month of your birthday.
Once you reach full retirement age, though, you can keep every dollar of your Social Security benefits, no matter how much income you bring in. Your future benefits will also be adjusted to include the money that the earnings test previously factored out.
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You Can Receive Benefits Before Your Full Retirement Age
You can start receiving your Social Security retirement benefits as early as age 62, but the benefit amount will be lower than your full retirement benefit amount.
If you start receiving your benefits before your full retirement age, we will reduce your benefits based on the number of months you receive benefits before you reach your full retirement age.
If you wait until age 70 to start your benefits, your benefit amount will be higher because you will receive delayed retirement credits for each month you delay filing for benefits. There is no additional benefit increase after you reach age 70, even if you continue to delay starting benefits.
How Much Can I Earn And Still Get Benefits
When you begin receiving Social Security retirement benefits, you are considered retired for our purposes. You can get Social Security retirement or survivors benefits and work at the same time. However, there is a limit to how much you can earn and still receive full benefits.
If you are younger than full retirement age and earn more than the yearly earnings limit, we may reduce your benefit amount.
If you are under full retirement age for the entire year, we deduct $1 from your benefit payments for every $2 you earn above the annual limit. For 2022, that limit is $19,560.
In the year you reach full retirement age, we deduct $1 in benefits for every $3 you earn above a different limit. In 2022, this limit on your earnings is $51,960. We only count your earnings up to the month before you reach your full retirement age, not your earnings for the entire year.
If your earnings will be over the limit for the year and you will receive retirement benefits for part of the year, we have a special rule that applies to earnings for one year. The special rule lets us pay a full Social Security benefit for any whole month we consider you retired, regardless of your yearly earnings.
Read our publication, How Work Affects Your Benefits, for more information.
When you reach full retirement age:
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What If I Delay Taking My Benefits
If you retire sometime between your full retirement age and age 70, you typically earn a “delayed retirement” credit for your own benefits . For example, say you were born in 1960, and your full retirement age is 67. If you start your benefits at age 69, you would receive a credit of 8% per year multiplied by two . This means your benefit would be 16% higher than the amount you would have received at age 67.
When You Should Delay Social Security
Waiting until age 70 to file for benefits can be a fantastic way to increase your monthly income, and if your savings are falling short, delaying benefits could be a smart move.
This strategy could also be wise if you have reason to believe you’ll have a longer-than-average lifespan. The longer you live, the more likely it is that your savings will eventually run dry. If that happens, an extra $10,000 per year in Social Security benefits could go a long way.
That said, delaying Social Security isn’t right for everyone. If you believe you may live a shorter-than-average lifespan, for example, you could actually receive more over a lifetime by claiming early. While each check will be smaller, you’ll collect more payments in total compared to if you’d delayed benefits.
Claiming early can also be wise if you’re forced into an early retirement due to job loss or health issues. You don’t have to file for Social Security as soon as you retire, but if you retire at 62 and delay benefits until age 70, you risk depleting your savings too quickly.
There’s no single right answer as to when you should take Social Security. By claiming at the right age for your situation, it will be easier to maximize your Social Security.
The $18,984 Social Security bonus most retirees completely overlook
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Before You Make Your Decision
There are advantages and disadvantages to taking your benefit before your full retirement age. The advantage is that you collect benefits for a longer period of time. The disadvantage is your benefit will be reduced. Each person’s situation is different. It is important to remember:
- If you delay your benefits until after full retirement age, you will be eligible for delayed retirement credits that would increase your monthly benefit.
- That there are other things to consider when making the decision about when to begin receiving your retirement benefits.
Social Security: How To Boost Your Benefits By $10848 Per Year
Social Security is an integral source of income for millions of retirees, and 76% of U.S. adults say that it’s more important than ever to optimize their benefits, according to a 2022 survey from the Nationwide Retirement Institute.
Fortunately, it is possible to increase the size of your monthly payments. And there’s one move, in particular, that could potentially boost your checks by more than $10,000 per year.
Image source: Getty Images.