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.
What If You Are Divorced
If you are divorced from a worker who is entitled to a Social Security retirement benefit, and your marriage lasted at least 10 years, you may have the opportunity to claim benefits on your ex-spouses recordeven if he or she remarried.
- If you are divorced, you can receive spousal benefits on your ex-spouses record if you are unmarried, at least 62 years old, and the benefit youre entitled to on your ex-spouses record is more than what you could get through your own record.
- If your ex-spouse dies, you may be entitled to a survivors benefit on his or her record. You can claim as early as age 60 for reduced benefits, or receive full benefits at your full retirement age. And if you remarry after age 60, theres no impact on your eligibility.
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Do Survivor Benefits Increase After Full Retirement Age
If you are the surviving spouse who is claiming benefits based on your deceased partner’s work record, there is no benefit to waiting until after FRA to claim your benefits. You do not earn delayed retirement credits, so your benefit will not increase.
However, if you are the higher-earning spouse, delaying your claim for benefits until after FRA can result in your widow receiving more monthly income, as your widowed partner will receive the higher of the two monthly benefits you were each receiving.
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Ways To Boost Your Social Security Income
Waiting longer to file for your Social Security benefits is one of the two ways you can boost them. The other is to earn more money in your working career. The Social Security Administration calculates your payout based on the 35 highest-earning years of your career, up to the annual wage limit. For 2023, the Social Security wage base is $160,200, meaning any money you can earn up to that limit will help raise your Social Security benefit.
Social Security Benefits For Workers Turning 60 In 2020 Will Very Likely Drop Due To The Coronavirus Pandemic
Congress could pass legislation that would prevent this outcome.
As a result of the COVID-19 pandemic, about 3 million retired workers who turn 60 years old in 2020 will very likely have much lower lifetime Social Security benefits than previously expected. Without legislative changes, the average earner stands to lose nearly $1,500 per year for the rest of their life. Fortunately, there is a simple legislative changeexplored in detail belowthat would fix these problems without lowering the benefits of any other cohort of retirees. Chairman of the U.S. House Ways and Means Social Security Subcommittee, Rep. John Larson , has introduced such legislation*and Congress should fix this situation as soon as possible.
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How Does Full Retirement Age Affect Your Social Security Benefits
If you claim your benefits at full retirement age, you will receive your standard Social Security benefit amount. If you claim prior to FRA, you will be subject to early filing penalties that reduce your benefit by the following amounts:
- 5/9 of 1% for each of the first 36 months before FRA
- 5/12 of 1% for each subsequent month before FRA
This amounts to a 6.7% annual reduction for each of the first three years and an additional 5% reduction for each following year before FRA. If you claim benefits at 62 with an FRA of 67, you will face a full 30% reduction in benefits.
By contrast, if you claim benefits after FRA, you receive delayed retirement credits valued at 2/3 of 1% per month. This results in an 8% annual increase to your monthly benefit. Delayed retirement credits can be earned until age 70, after which time there is no financial benefit to delaying your claim. Delayed retirement credits cannot be earned if you are claiming either spousal or survivor benefits.
Do You Expect To Have Additional Sources Of Retirement Income Beyond Social Security
Continue saving in the coming years.
Social Security wonât replace all of your pre-retirement income. On average, Social Security replaces 40 percent of a workerâs income. That means your retirement savings, pension, 401, or Individual Retirement Account will need to fill the gap. Claiming at your full Social Security benefit age or later can minimize this gap and maximize your monthly benefit. If you claim before your full retirement age, your monthly benefit could be reduced by as much as 30 percent.Learn more about saving for retirement.
You have an opportunity to continue growing your money.
If you can, get the highest monthly Social Security benefit possible by claiming at your full Social Security benefit age or later. If you claim before your full retirement age, your monthly benefit could be permanently reduced by as much as 30 percent. Also, take advantage of catch-up contributions to your 401 or Individual Retirement Account . Lastly, avoid losing your retirement savings to unnecessary tax penalties. If you withdraw your 401 or IRA savings before age 59½, you will likely face an early withdrawal penalty.Learn more about how retirement savings grow.
Itâs a perfect time to start saving.
Itâs never too late to start saving!
There are many ways to plan for a secure retirement outside of Social Security.
Itâs never too late to start saving!
A type of retirement savings account offered by employers to help their employees save for retirement.
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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.
Learn How Social Security Works
Start by learning how Social Security works. The system is designed to collect taxes from those who are currently working and to use them to pay what’s due to beneficiaries. This has worked well for many decades, creating annual surpluses, but as people are living longer and the ratio of workers to beneficiaries has shrunk a lot, surpluses may be ending soon — if Congress doesn’t take some action.
Qualifying for Social Security is easy for most of us. You simply have to collect 40 quarterly “credits” — which are currently valued at $1,510 and will be $1,640 for 2023. You can collect up to four such credits per year, if you earn at least $1,510 in four quarters, which would total just $6,040. Over 10 such years, you’d fully qualify. That’s a fairly low hurdle, and it means that most people will qualify after working just 10 years.
If that’s all you work, though, your future benefits will be paltry — because the formula that determines your benefits bases it on your earnings in the 35 years in which you earned the most.
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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 Can I Start Collecting Social Security
The minimum age to claim benefits is 62. If you are turning 62 and need the income from Social Security to support yourself, then you can start claiming your benefits now. However, if you have enough other income to keep you going until you are older, you may want to delay increasing the size of your monthly benefit.
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How To Get A New Social Security Card
If you lose your Social Security card, you dont need a replacement in most cases. Just knowing your number is enough, SSA says.
If you do need a replacement, you can apply online with a free my Social Security account or in-person. If you cant use your account to request a replacement card, you can still start the process and complete it at a local Social Security office, typically more quickly, SSA says. In that case, though, youll need to provide required documents, such as a birth certificate, drivers license and passport.
Does Working After Full Retirement Age Increase Social Security Benefits
Working after full retirement age could increase your Social Security benefits. Your benefits are based on average wages over your 35 highest-earning years .
Even after you’ve reached full retirement age, and even if you’ve already claimed benefits, the Social Security Administration continues to recalculate your average annual wage to account for new income. If your earnings after FRA are higher than previous years and raise your average wage for your 35 top-earning years, your benefits could rise accordingly.
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B You Can Stop Working And Start Receiving Your Retirement Benefits
If you make the decision to stop working and start receiving retirement benefits before your full retirement age, your benefits are reduced a fraction of a percent for each month before your full retirement age. Also, your benefits will not increase because of additional earnings.
We calculate your benefits based on your highest 35 years of earnings, and if you stop working before you have attained 35 years of earnings or you have years with low earnings, this will affect your benefit calculation.
If you delay your benefits until after full retirement age, you will be eligible for delayed retirement credits that would increase your benefit.
If you stop working and start receiving retirement benefits before age 65, you are automatically enrolled in Original Medicare when you turn 65. If you are not receiving your Social Security benefits when you turn 65, you will need to apply for Medicare benefits three months before you turn 65. If you dont sign up for Medicare Part B when youre first eligible, you may have to pay a late enrollment penalty for as long as you have Medicare coverage.
Whats Your Social Security Break
If youre looking to maximize your total lifetime Social Security payout, youll want to conduct a break-even analysis to determine when you should start drawing your benefits.
Your break-even age occurs when the total value of higher benefits starts to exceed the total value of lower benefits .
For example, if you are eligible to collect a reduced $900 benefit at age 62 plus 1 month, and your benefit would increase to $1,251 at age 65 and 10 months, your estimated break-even age is 75 years and 5 months.
If you expect to live beyond that age, it could make financial sense to delay drawing benefits. The Social Security Administrations life expectancy calculator can help you decide.
When it comes to calculating a start date for Social Security benefits, however, theres not an age thats appropriate for everyone. Consider your own financial needs, health and other retirement plans before making the call. If you cant reasonably afford to live without taking benefits, it may make little sense to delay taking your benefit.
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How To Plan For Future Benefits
In 2000, the average age at which people retired was roughly 61 or 62. Two decades later, it’s around 66, according to government data, Warshawsky said.
“Just in 20 years, we’ve seen a substantial increase in the retirement age,” Warshawsky said. “People really, really are working longer.”
Anecdotally, Elsasser said he sees more people retiring earlier than they had anticipated as their work prospects change.
That highlights the importance of planning ahead, so you anticipate whatever your retirement years bring. Admittedly, that can be tricky, given that Social Security could be susceptible to change.
If you’re 60 and up, there is less reason to worry any prospective changes would affect your benefits, Elsasser said.
But if you’re 45 to 60 years old, it’s reasonable to plan for benefit reductions of about 5%, he said. For those who are even younger, a 10% to 15% cut is possible.
Moreover, people of all ages should also plan for worst-case scenarios in which the program does reach a point where it can only pay a portion of benefits, which may prompt as much as a 24% benefit cut for retirees.
“The real importance of planning is just making sure you have all your bases covered,” Elsasser said.
Social Security Benefits In The United States Are Lower Than In Many Other Developed Countries
Governments around the world are feeling fiscal pressure, and some have adopted austerity programs that trim retirement benefits. This has prompted some commentators to ask why the United States should be different. But that question ignores the fact that most other developed countries have more generous public pension systems than the United States.
The Organisation for Economic Co-operation and Development has tallied the percentage of past earnings that the public pension system replaces for various countries. By that measure, the United States ranks in the bottom third among major developed nations. The average OECD nation has a public pension program that replaces half of earnings for an average worker the U.S. system replaces about 40 percent of earnings.
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Future Retirees Already Face A Benefit Squeeze
Social Security has always aimed to provide retired or disabled workers with a benefit that replaces a reasonable fraction of their lost earnings. Benefits make up a larger fraction of past earnings for lower-paid workers than for higher-paid workers, which is one of the programs progressive features. In Social Security parlance, lower-wage workers receive a higher replacement rate.
Although individual circumstances vary, financial planners recommend as a rule of thumb that retirees aim to build a portfolio that replaces about 70 percent of their previous income. Social Security will get them only partway toward that goal. For a medium worker who retires at age 65 in 2020, Social Security will replace about 38 percent of previous earnings. That figure has fallen in recent years, and will continue to fall further as the programs age for full benefits , which climbed from 65 to 66 in the past decade, rises further from 66 to 67 as a consequence of legislation enacted in 1983 .
Furthermore, rising Medicare premiums will take a growing bite out of beneficiaries Social Security checks. Most beneficiaries 65 and older, along with most disabled workers under age 65, participate in Medicares Supplementary Medical Insurance program and have the premium deducted from their Social Security checks. Most also enroll in the prescription drug program, Medicare Part D, although they pay the premium to their chosen insurance plan rather than having it deducted from their check.
A Guide On Taking Social Security
Deciding when to take Social Security depends heavily on your circumstances. You can start taking it as early as age 62 , or you can wait until you’ve reached full retirement age or age 70 based on your work history. While there’s no “correct” claiming age for everybody, the rule of thumb is that if you can afford to wait, delaying Social Security can pay off over a long retirement. Here are some guidelines to consider.
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Medicare Eligibility At Age 65
- You are at least 65 years old
- You are a U.S. citizen or a legal resident for at least five years
In order to receive premium-free Part A of Medicare, you must meet both of the above requirements and qualify for full Social Security or Railroad Retirement Board benefits, which requires working and paying Social Security taxes for at least 10 full years .
Learn more about Medicare eligibility at and before age 65 by referring to this helpful chart and reading more information below.
Change Is Always Possible
It’s not hard to understand why the solvency of Social Security has been the center of a growing national debate over the past few years. It’s simple economics.
More people are retiring than entering the workforce, which will eventually reduce the ratio of workers to retirees to 2-to-1 . In addition, people are living much longer in retirement, sometimes decades longer.
Under the pressure of possible insolvency, Congress has debated several Social Security reform measures in recent years. While no new legislation has been passed, the possibility continues to exist for dramatic revisions to this social insurance system to come about in the future, changing how Social Security factors into your retirement planning.
To learn more about your benefits, visit the Social Security website at www.ssa.gov.
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How Will Working Affect Social Security Benefits
In a recent survey, 70% of current workers stated they plan to work for pay after retiring.1
And that possibility raises an interesting question: how will working affect Social Security benefits?
The answer to that question requires an understanding of three key concepts: full retirement age, the earnings test, and taxable benefits.