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.
What Happens If I Work And Get Social Security Retirement Benefits
You can get Social Security retirement benefits and work at the same time. However, if you are younger than full retirement age and make more than the yearly earnings limit, we will reduce your benefit. Starting with the month you reach full retirement age, we will not reduce your benefits no matter how much you earn.
- We use the following earnings limits to reduce your benefits: 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, but we only count earnings before the month you reach your full retirement age.
If you will reach full retirement age in 2022, the limit on your earnings for the months before full retirement age is $51,960.
Starting with the month you reach full retirement age, you can get your benefits with no limit on your earnings.
Use our Retirement Age Calculator to find your full retirement age based on your date of birth.
Use our Retirement Earnings Test Calculator to find out how much your benefits will be reduced.
What counts as earnings:
Your benefits may increase when you work:
When youre ready to apply for retirement benefits, use our online retirement application, the quickest, easiest, and most convenient way to apply.
If you need to report a change in your earnings after you begin receiving benefits:
How To Apply For Social Security Benefits At Age 62
- If you are planning to retire at age 62, Social Security benefits can help to fund this dream. Here are some facts about early applications for Social Security.
Early retirement is a dream for many people. Social Security benefits can be an important way of achieving that dream. Understanding the application process and the consequences of early retirement on your Social Security benefits can help you make the most practical decisions about this source of income in retirement.
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Working After Full Retirement Age Might Increase Benefits
For the purposes of calculating your retirement benefit, working after full retirement age is essentially the same as working before. After all, youll continue to pay Social Security taxes on your earnings as long as you work, so youre still eligible to derive benefits from those earnings.
But your actual benefit will increase only if youre still earning at a level that equals or exceeds your top 35 working years. If your earnings are less, they wont affect your benefit because the SSA uses your top 35 years of earnings to calculate what youre paid.
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In this sense, its not worth it to continue working from full retirement age to age 70 if you arent earning much, at least from a Social Security benefit perspective. Obviously, youll still get to keep the money you earn but, unless those years are among your top 35, your Social Security retirement benefit wont increase.
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.
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Age : The Earliest You Can Claim Social Security
Retirement planning revolves around a number of key milestones. You must be 59 1/2 in order to take withdrawals from an IRA or 401 without a penalty. You must be 65 to apply for Medicare. And the earliest age to claim Social Security retirement benefits is age 62. But you can also choose to wait.
To paraphrase an old saying, when it comes to Social Security benefits, a bird in the hand is worth up to 30% less than one in the bush.
The benefits you claim at 62 are considered reduced, because youre getting up to 30% less than the amount youd receive if you waited until your full retirement age.
Sure, the earlier you start receiving Social Security, the more monthly payments youll get between when you start and when you pass away. But the longer you wait to start, the higher each payment will be. So, really, it becomes a question of life expectancy. How long you expect to live determines your breakeven age .
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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The Downside Of Claiming Early: Reduced Benefits
Consider the following hypothetical example. Colleen is 62 as of 2022. If Colleen waits until age 67 to collect, she will receive approximately $2,000 a month. However, if she begins taking benefits at age 62, she’ll receive only $1,400 a month. This “early retirement” penalty is permanent and results in her receiving 30% less year after year.
However, if Colleen waits until age 70, her monthly benefits will increase another 24% over what she would receive at her FRA, to a total of $2,480 per month.1 If she were to live to age 89, her lifetime benefits would be about $112,000 more, or at least 24% greater, because she waited until age 70 to collect Social Security benefits.2
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 youve made multiple trips to the altar, you can pick which spouses benefits you want to claim, based on whats most beneficial to you.
Like a regular spousal benefit, you can get up to 50% of an ex-spouses benefitless 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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Tax Considerations For Social Security Benefits
How do these tax considerations affect when you should apply for Social Security benefits? At todays , they may not have much of an impact on most people. Still, tax rates and income thresholds can change, so its worth remembering that you will lose less of your Social Security to taxes if you are in a lower marginal tax bracket when you begin to collect.
You should also note that if you decide to return to work, even part-time, and arent yet at your FRA, your Social Security benefits may be temporarily reduced. The reduction is $1 for every $2 of earned income over $18,960 in 2021 . During the year when you reach your FRA, your benefits will be reduced by $1 for every $3 in income over $50,520 in 2021 until the month when you become fully eligible. That money isnt lost, however. The SSA will credit it to your record when you reach your FRA, resulting in a higher benefit.
Order your copy of the print edition of Investopedias Retirement Guide for more assistance in building the best plan for your retirement.
Earnings Withheld While Working Increases Social Security Benefits
Its possible to receive higher Social Security benefits by having your earnings withheld while you work. The Social Security Administration calculates the appropriate amount of withholding to deduct from your monthly benefit. During retirement, your government holds back the entire amount to cover the withholding. For example, if you receive $1,000 per month in Social Security, you could end up with withholding $4,000 from that same check.
In addition to having your benefit withheld, your Social Security benefits will be reduced if you work past full retirement age. For those born between 1943 and 1959, the full retirement age is 66 or 67 years old. For every two dollars of income over $18,960, the Social Security agency will withhold $170 from your benefit. This means that youll get a reduced benefit of $520 per month.
In the year 2022, the earnings cap will change. By then, the limit will increase to $19,560 per year. Youll still be allowed to earn up to 40 credits. The Social Security system will withhold some of your benefits if you earn more than this amount. This limit can change from year to year. The full retirement age will apply to you in 2022, so youll need to make sure you have reached this milestone before the end of your retirement.
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When Can I Retire When Can I Take Social Security
Obviously, people want the option to retire as soon as they likethe earliest age generally being 62. But the decision to take Social Security retirement benefits can be complicated by your health, your marital status and your spouses Social Security plan.
One of the key factors is the year you were born, as when you were born will determine your Full Retirement Age For people born between 1943 and 1954, for example, Full Retirement Age is 66. As shown below, the Full Retirement Age creeps up by two months for every year between 1955 and 1960. Everyone born after 1960 currently has a Full Retirement Age of 67.
Full retirement age doesnt tell the full picture. As we will explain in this piece, retirement at each age has benefits and drawbacks.
History Of Full Retirement Age
The FRA was 65 when Social Security began in 1935. Legislation in 1983 increased the FRA for people born in 1938 or later to a maximum of 67 to account for gains in life expectancy.
Social Securitys trustees project growing deficits for the Social Security Trust Fund, drawing down its reserves to cover benefit payments. By the most recent estimates, the combined reserves of Social Security’s Old-Age and Survivors Insurance trust fund and the Disability Insurance Trust Fund would be depleted by 2035.
Some conservatives have cited concerns about the program’s solvency in advocating a further increase in the FRA. Social Security’s projected deficits could be addressed with benefit cuts, payroll tax increases or a combination of those approaches. Alternatively, they could be financed with debt alongside other deficit spending.
To figure out your full retirement age, use the online calculator offered by the Social Security Administration .
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Pension At : Will The Corona Crisis Affect Future Pension Contributions
The economy suffered during the corona pandemic.
The economic crisis also left its mark on the workforce: many workers were sent on short-time work or even lost their jobs.
But what effects does this have on future pensions?
Short-time work has only a minor influence on the amount of pensions.
The basis is 80 percent of the salary that is lost due to short-time work.
The contributions to the pension insurance are increased accordingly.
The situation is similar with unemployment.
If employed persons receive unemployment benefit I, contributions are made to the insurance based on 80 percent of the salary with which the pension contributions were calculated.
Workers should be especially careful with part-time jobs.
With a half position, only half of the contributions flow into the pension fund.
Although the years in part-time count as contribution years, the pension amount is lower.
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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.
Early Benefits Can Still Pay Off
However, taking early benefits can still pay off despite the reduced monthly check. But youll want to be sure you budget for a reduced benefit.
No one can predict how long youll live, but if youre facing a potentially significant reduction in life expectancy and are short of income, taking Social Security early may be appropriate, Neiser says.
Married women are also good candidates for claiming early benefits because they are likely to outlive their husbands. Those widows then become eligible to receive the greater of either their benefit or their late husbands benefit.
However, this scenario works only if the husband does not claim his benefits early. By not claiming early benefits, the husband effectively increases the monthly benefit his wife eventually receives. So, youll want to calculate how filing early will affect your spousal benefit here.
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Full Retirement Age For Survivors Benefits
Your FRA may be different if youre a widow or widower collecting survivors benefits. In fact, it may be earlier than the normal retirement age for your own Social Security benefits.
If you were born in 1956, for example, your FRA is 66 and four months. But survivors may begin receiving benefits four months earlier, at age 66.
The earliest you can begin claiming survivors benefits is 60. But much like standard Social Security benefits, youll receive a reduced monthly benefit amount if you want access to your survivors benefits before you reach your FRA.
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How To Apply For Social Security Disability Benefits At Age 62
You must apply for SSD benefits as soon as you develop a disability that qualifies you for receiving disability benefits. You can apply either in the online mode or the offline mode. For applying in online mode, you must follow a few easy steps-
- Navigate to the Apply for Benefits page on the SSA website. Agree to the Terms of Service that follow and click âNext.â
- Review the âGetting Readyâ section and ensure that you have everything needed to apply for benefits.
- Choose âStart A New Application.â
- Ask the questions mentioned in the Application.
- Create your personal Social Security account and sign in.
- Complete the Application process.
You can file for SSI benefits at the same time as you file for SSDI benefits. On completing the online application process, a Social Security representative will contact you.
You can also apply in the offline mode if you are not comfortable in applying over the internet. As such, you have the following options-
Applying With Your Local Office
If you are not comfortable with the online service, you can find the phone number for your local Social Security Office by using the Office Locator on SSA website. The toll-free âOfficeâ number is your local office. It will assist you with your application for SSD benefits.
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