The Bleak Future Of Social Security
Aggravated by the COVID pandemic, the Social Security trust fund most Americans rely on for their retirement will run out of money in 12 years, one year sooner than expected, according to the annual Social Security 2021 Trustees Report published on August 31, 2021. The pandemic also threatens to shrink retirement payments and increase health-care costs for older Americans, according to the Trustees.
The Treasury Department oversees two Social Security funds: Old-Age and Survivors Insurance and Disability Insurance Trust Funds. These funds are intended to provide a source of income to former workers who have retired at the end of their careers or to those who cannot work due to a disability, respectively.
Social Security officials said that the Old-Age and Survivors trust fund is now able to pay scheduled benefits until 2033, one year earlier than reported last year. The Disability Insurance fund is estimated to be adequately funded through 2057, eight years earlier than in the report published in 2020.
In a press briefing, senior Biden administration officials said that a COVID-related spike in deaths among retirement-age Americans in 2020 helped keep the programs costs lower than projected. They also noted, however, that the long-term effects of the COVID pandemic on the Social Security trust funds is harder to project as costs and revenues return to their extended forecasts.
Find Your Social Security Full Retirement Age
You can claim your Social Security benefits a few years before or after your full retirement age, and your monthly benefit amount will vary as a result. But first you have to know what it is.
Also known as normal retirement age, your Social Security Full Retirement age is the age at which youre entitled to 100% of the Social Security benefits youve earned. FRA is 66 for beneficiaries born between 1943 and 1954 it gradually increases to 67 for beneficiaries born in 1960 or later. If you take benefits before FRA, your benefits will be reduced. If you file at age 62, for example, benefits will be as much as 30% lower. More on that in a moment.
Your May Have To Pay Taxes On Social Security Benefits
Most people know that Social Security is funded by a tax on earnings, currently 6.2% for the employee . But some retirees dont realize that you may well have to pay income tax on Social Security benefits when it comes time to claim them. Benefits lost their tax-free status in 1984, and the income thresholds for triggering tax on benefits havent been increased since then.
It doesnt take a lot of income for your Social Security benefits to be taxed. Your benefits wont be taxed if your provisional income is less than $25,000 if youre single or $32,000 if youre married. If youre single and your provisional income is between $25,000 and $34,000, or married filing jointly with provisional income between $32,000 and $44,000, up to 50% of your Social Security benefits may be taxable. If your provisional income is more than $34,000 on a single return or $44,000 on a joint return, up to 85% of your benefits may be taxable.
The Social Security Administration says about 40% of beneficiaries pay taxes on their benefits. Since the thresholds arent adjusted for inflation, the number of beneficiaries who pay taxes on Social Security benefits increases every year. The Social Security Trustees annual report estimates that taxes on Social Security will total $45.1 billion in 2022, up from $34.5 billion in 2021.
You may also have to pay state income taxes on your Social Security benefits. See our list of the 12 States That Tax Social Security Benefits.
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About The Author: John Rafferty
John Rafferty has spent much of his 30-year career building annuity marketing departments at MassMutual, AIG/American General, and Symetra. He holds a B.A. in economics from Colby College and an M.A. in public policy from Trinity College, and currently operates an annuity sales and marketing consultancy, RaffertyAnnuityFraming.com.
Can You Still Work While Receiving Social Security
You can continue to work while you receive Social Security benefits. But there is a limit to how much you can earn and still receive full benefits. The earning limit may be adjusted each year.
If you earn above the limit, Social Security will deduct a certain amount of your benefits each year.
Social Security Benefits, Earning Limits and Penalties
|SSA deducts $1 from your benefits for every $3 you earn above the limit|
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How Much Higher Is Social Security At 70 Than At 62
The answer: It depends on what metric you choose. Do you want to compare the difference in todays 2022 dollars, or in inflated future dollars ? Here is an example using the Social Security Administrations online Quick Calculator:
This calculator asks the user to select either future benefits in todays 2022 dollars, or in inflated, future dollars. In our example below, both were chosen.
A retiree stops working in 2021, having earned $200,000 in that year. They turn 62 in June of 2022 and have a substantial retirement portfolio from savings and investments over their just-finalized career. According to the Quick Calculator, if they start benefits:
- In June of 2022 at age 62, they will collect $2,269 a month.
- In June of 2030 at age 70, they will collect:
- $4,901 a month
- $3,996 a month
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You Can Claim Social Security Benefits Earned By Your Ex
The end of a marriage doesnt spell the end of being able to get get a Social Security benefit based on your former spouses earnings. You can still receive a benefit based on his or her record instead of a benefit based on your own work record, so long as you were married at least 10 years, you are 62 or older, and you are currently unmarried. And guess what: If you’ve made multiple trips to the altar, you can pick which spouse’s benefits you want to claim, based on what’s most beneficial to you.
Like a regular spousal benefit, you can get up to 50% of an ex-spouses benefit less if you claim before full retirement age. And the beauty of it is that your ex never needs to know because you apply for the benefit directly through the Social Security Administration. Taking a benefit on your ex-spouses record has no effect on his or her benefit or the benefit of your exs new spouse. And unlike a regular spousal benefit, if your ex qualifies for benefits but has yet to apply, you can still start collecting Social Security based on the exs record, though you must have been divorced for at least two years.
Note: Ex-spouses can also take a survivor benefit if their ex died after the divorce, and, like any survivor benefit, it will be worth up to 100% of what the ex-spouse received. If you remarry after age 60, you are still eligible for the survivor benefit.
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Theres An Annual Social Security Cost
One of the best features of Social Security benefits is that the government adjusts the benefits each year based on inflation. This is called a cost-of-living adjustment, or COLA, and helps your payments keep up with increasing living expenses. The Social Security COLA is significant. Its the equivalent of buying inflation protection on a private annuity, which can get expensive.
Because the COLA is calculated based on changes in a federal consumer price index, the size of the COLA depends largely on broad inflation levels determined by the government . In 2023, Social Security beneficiaries will likely see a 9.7% COLA in their monthly Social Security benefits, the biggest increase since 1981. The COLA for 2023 will be announced on October 13.
Heres what COLAs have been in other recent years:
- 2009: 5.8%
- 2022: 5.9%
Other Pensions Might Reduce Your Social Security Benefits
Your benefits will be affected if you have a pension from a job that didnt have Social Security taxes taken out of your paycheck. Common examples include people who worked for a public education system, railroad workers and Federal government employees hired before 1984 who are covered by the Civil Service Retirement System .
Two complicated provisions will affect your claiming strategy: the Windfall Elimination Provision and the Government Pension Offset . The WEP reduces your own benefits by a discounted factor based on how many years you worked in jobs that did not withhold Social Security taxes. The GPO reduces your spousal and survivor benefits by two-thirds of the amount of your noncovered pension.
Effect Of Delaying Retirement Benefits
1Represents Full Retirement Age based on DOB January 2, 1960
2PIA = The primary insurance amount is the basis for benefits that are paid to an individual
That higher baseline would last for the rest of your retirement and serve as the basis for future increases linked to inflation. While it’s important to consider your personal circumstancesâit’s not always possible to wait, particularly if you are in poor health or can’t afford to delayâthe benefits of waiting can be significant.
Be aware that if you decide to wait past age 65, you may still need to sign up for Medicare. In some circumstances your Medicare coverage may be delayed and cost more if you don’t sign up at age 65. If you start Social Security benefits early, you’ll automatically be enrolled into Medicare Parts A and B when you turn age 65.
Your annual Social Security statement will list your projected benefits between age 62 to 70, assuming you continue to work and earn about the same amount through those ages. If you need a copy of your annual statement, you can request one or view it online on the Social Security Administration portal.
How To Receive Federal Benefits
To begin receiving your federal benefits, like Social Security or veterans benefits, you must sign up for electronic payments with direct deposit.
If You Have a Bank or Credit Union Account:
- Call the Go Direct Helpline at .
If You Don’t have a Bank or Credit Union Account:
- Direct Express debit card – a pre-paid debit card. Get help by calling the Go Direct Helpline at .
Make Changes to an Existing Direct Deposit Account:
On Go Direct’s FAQ page, learn how to make changes to an existing direct deposit account. You also may contact the federal agency that pays your benefit for help with your enrollment.
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Try This Life Expectancy Calculator For Social Security
Retirement benefit calculations are based on extensive actuarial studies and data. As a service to the public, the Social Security Administration has developed a simple Life Expectancy Calculator that allows you to plug in your gender and date of birth to get a rough estimate of how long you may live.
Knowing this information may help you in deciding when the right time is to apply for retirement benefits.
To use the Calculator, go to
Earnings And Their Impact On Your Benefit Amount: How Much Will My Social Security Payment Be
Certain types of earnings may reduce your actual retirement benefit amount, while others will not. Those that may reduce the amount you receive include:
- Wages earned as an employee. These dollars will be calculated for the taxable year that you earn them.
- Self-employment net earnings. These dollars are calculated for the taxable year that they are received.
- Work related income, including commissions and bonuses.
Other types of earnings will not impact the amount of the retirement benefit you receive. Generally, these will include:
- Retirement and pension payments
- Investment income
- Income earned after you reach your full retirement age
In some instances, other types of income may affect the bottom line of your retirement benefit amount. Its best to check with your tax professional or call the Social Security Administration at 1-800-772-1213.
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Information For Tricare Beneficiaries
If you have TRICARE and your withdrawal includes your Medicare Part A coverage, you may lose your TRICARE coverage. If you do not withdraw your Medicare Part A coverage, you may need to stay enrolled in Medicare Part B to keep your TRICARE coverage. For more information, visit TRICARE’s Beneficiaries Eligible for TRICARE and Medicare.
Social Security: Before You Apply For Retirement Benefits: What To Know
Are you thinking about retiring and applying for Social Security retirement benefits? Our online tools can make your planning easier. Visit www.ssa.gov/myaccount to access your personal my Social Security account to get an instant and personalized estimate of your retirement benefits based on your earnings record. It is important that your earnings record is correct because we base your benefit amount on the earnings reported to us. If you find an error, you will want to contact us to get your information corrected. Read our publication, How to Correct Your Social Security Earnings Record, at www.ssa.gov/pubs/EN-05-10081.pdf, to learn how.
You can also get benefit estimates based on different retirement ages, and choose the best retirement age for you. Dont have a personal my Social Security account? You can create one today at www.ssa.gov/myaccount.
When youre ready to apply for Social Security retirement benefits, you can complete your application online in as little as 15 minutes at www.ssa.gov/retirement. We will contact you if we need any more information. You can check the status of your application with your personal my Social Security account.
You can apply online for your Social Security retirement benefits, and for benefits as a spouse, if you meet all the following criteria:
You must be at least age 62 for the entire month to be eligible to receive benefits.
You are not currently receiving benefits on your own Social Security record.
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There Are Social Security Survivor Benefits For Spouses And Children
If your spouse dies before you, you can take a Social Security survivor benefit. However, that wont be in addition to your own benefit. You must choose one or the other. If you are at full retirement age, that benefit is worth 100% of what your spouse was receiving at the time of his or her death .
A widow or widower can start taking a survivor benefit at age 60. However, the payment will be reduced because its taken before full retirement age. Theres a twist available assuming the survivor has benefits of their own available and hasnt already filed for them: Take the survivor benefits as early as possible, which is age 60, and switch to your own retirement benefits at age 70. Your survivor benefits will be reduced because you will have filed for them before your full retirement age, but your own benefits will grow, garnering delayed-retirement increases, until age 70. Online programs such as the one offered by Social Security Solutions can help you compare the cumulative benefits for each strategy to determine which one provides the highest payout.
Remarriage has implications here. If you remarry before age 60, you are not eligible for a survivor benefit. If you remarry after age 60, you may be eligible for a survivor benefit based on your former spouses earnings.
Eligible children who are under age 18 or were disabled before age 22 can also receive a Social Security survivor benefit. It would be worth up to 75% of the deceased’s benefit.
Set Up A Phone Appointment
In contrast, a phone appointment might be the best balance of convenience and directly talking with a representative, and you dont have to be computer savvy either. You can call your local office or 1-800-772-1213 to reach the national line Monday through Friday between the hours of 8 a.m. and 5:30 p.m. Eastern Time.
Vredeveld says that his firms clients have had really good experiences when they pre-schedule an appointment, though it may not be possible to schedule an appointment earlier than one or two months out. So, plan accordingly.
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Other Information Youll Need
If youre married, youll also need to provide your spouses name, Social Security number , date of birth and age. Youll also need to have the date and place of marriage, and this goes for any former spouses as well. For logistical purposes, youll want to indicate what month you want your benefits to begin, and youll need to provide your banks routing number and your account number.
As part of your application, you can also indicate if you would like to enroll in Medicare Part B, but youll have to be eligible.
You should also note in your application if:
- You have any unmarried children under the age of 18 or disabled children under the age of 22.
- You or someone else has ever filed for Social Security benefits, Medicare or Supplemental Security Income on your behalf
- Youve ever used a different SSN
How Much Will Your Retirement Benefit Be
The Social Security Administration calculates your primary insurance amount , upon which your retirement benefit will be based, using a formula that takes into account your 35 highest earnings years. At your full retirement age, youll be entitled to receive that amount. This is known as your full retirement benefit. Because your retirement benefit is based on your average earnings over your working career, if you have some years of no earnings or low earnings, your benefit amount may be lower than if you had worked steadily.
Your age at the time you start receiving benefits also affects your benefit amount. Although you can retire early at age 62, the longer you wait to begin receiving your benefit , the more youll receive each month.
You can estimate your retirement benefit under current law by using the benefit calculators available on the SSAs website, ssa.gov. You can also sign up for a my Social Security account so that you can view your online Social Security Statement. Your statement contains a detailed record of your earnings, as well as estimates of retirement, survivor, and disability benefits. If youre not registered for an online
account and are not yet receiving benefits, youll receive a statement in the mail every year, starting at age 60.
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