How Much Can I Earn
The annual Social Security earnings limit for those starting benefits before reaching full retirement age in 2021 is $18,960. In 2022, the limit is $19,560. Full retirement age is based on your year of birth.
If you earn over the limit, there are rules that determine how much your Social Security benefits will be reduced. There are three different earnings limit rules that apply, depending on whether you earn the income before, during, or after the year your reach full retirement age.
Each option is covered below.
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.
What Is Full Retirement Age
For Social Security purposes, your full or “normal” retirement age is between age 65 and 67, depending on the year you were born. If, for example, your full retirement age is 67, you can start taking benefits as early as age 62, but your benefit will permanently be 30% less than if you wait until age 67.
If you can manage without receiving your Social Security benefits at full retirement age, you can wait until age 70. That will give you the maximum benefit each month.
There’s no advantage to waiting past age 70 to start collecting benefits.
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Beware The Social Security Earnings Test
Bringing in too much money in earned income can cost you if you continue to work after claiming Social Security benefits early. With what is commonly known as the Social Security earnings test for annual income, you will forfeit $1 in benefits for every $2 you make over the earnings limit, which in 2022 is $19,560. Once you are past full retirement age, the earnings test no longer applies, and you can make as much money as you want with no impact on benefits.
Any Social Security benefits forfeited to the earnings test are not lost forever. At your full retirement age, the Social Security Administration will recalculate your benefits to take into account benefits lost to the test. For example, if you claim benefits at 62 and over the next four years lose one full years worth of benefits to the earnings test, at a full retirement age of 66 your benefits will be recomputed and increased as if you had taken benefits three years early, instead of four. That basically means the lifetime reduction in benefits would be 20% rather than 25%.
Claiming Social Security Widow Benefits: It’s Complicated
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While Social Security is a significant source of income for many retirees, navigating the intricacies of the program can feel overwhelming due to complex rules and practices. Its crucial for financial advisors to thoroughly understand the nuances within the Social Security program to help retirees correctly navigate and determine the optimal time to claim.
The widow benefit is one of the most common elements that advisors need to consider, but numerous stipulations can make it difficult to determine the impact. Heres a closer look at the widow benefit.
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How To Claim Survivors Benefits
To begin receiving survivors benefits, you must make a claim with the Social Security Administration. Survivors benefits claims may not be made online. You can start the claims process over the telephone, 1-800-772-1213, or go to your local Social Security office. Making an appointment may reduce your wait time.
The death should be reported to the Social Security Administration as soon as possible. In many cases, the funeral home can make that notification. You will have to provide the funeral home with the deceaseds Social Security number.
Whats The Net Worth Limit To Be Eligible For Survivors Pension Benefits
From December 1, 2021, to November 30, 2022, the net worth limit to be eligible for Survivors Pension benefits is $138,489.
On October 18, 2018, we changed the way we assess net worth to make the pension entitlement rules clearer. Net worth includes your assets and annual income. When you apply for Survivors Pension benefits, youll need to report all of your assets and income.
Note: If your child’s net worth is more than the net worth limit, we don’t consider them to be a dependent when we determine your pension.
Read our definitions below:
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Benefit Rate: Current Issues
The current policy discussion over benefit rates is tied both generally and specifically to the historical debate on the topic. At a general level, as in the past, there is a focus on how much Social Security income an individual “needs” following the death of a spouse. At a specific level, there has been considerable discussion about certain features of the 1972 amendments that establish a link between the retirement decisions of workers and the benefit amounts received by their widows.
Equivalent income. Much of the current debate on how much income a widow needs centers on the implications of equivalence scales, which are used to equate income for families of different sizes. For example, based on equivalence scales used for the official U.S. poverty thresholds, an elderly person living alone would need 79 percent of the income of an elderly couple to have the same standard of living. Note that the poverty equivalence scale does not use a per capita adjustment, which would imply a need for 50 percent of a couple’s income, because a two-person family can take advantage of economies of scale . That is, costs will be higher for a two-person family, but not double that of a single person. The basic Social Security benefit of a widow will be below 79 percent of the couple’s basic benefit, which has led to several proposals to guarantee widows a benefit equal to a specified percentage of the couple’s benefit.
For Qualified Surviving Spouses With At Least 1 Dependent:
| If you have 1 dependent child and | Your MAPR amount is : | ||
|---|---|---|---|
| If you have 1 dependent child and | You dont qualify for Housebound or Aid and Attendance benefits | Your MAPR amount is : | 12,951 |
Notes:
- The Survivor Benefit Plan /Minimum Income Annuity limitation is $9,896.
- If you have more than 1 child, add $2,523 to your MAPR amount for each additional child.
- If you have a child who works, you may exclude their wages up to $12,950.
- If you have medical expenses, you may deduct only the amount thats above 5% of your MAPR amount .
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Va Survivors Pension Benefit Rates
Learn about VA Survivors Pension benefit rates. If you qualify for this benefit as a surviving spouse or dependent child, well base your payment amount on the difference between your countable income and a limit that Congress sets .
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Your countable income is how much you earn, including your salary, investment and retirement payments, and any income you may have from your dependents. Some expenses, like non-reimbursable medical expenses , may reduce your countable income.
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Your MAPR amount is the maximum amount of pension payable to a Veteran, surviving spouse, or child. Your MAPR is based on how many dependents you have and whether you qualify for Housebound or Aid and Attendance benefits. MAPRs are adjusted each year for cost-of-living increases. You can find your current MAPR amount using the tables below.
Example: Youre a qualified surviving spouse with one dependent child. You also qualify for Aid and Attendance benefits. Your yearly income is $10,000.
Your MAPR amount = $18,867Your VA pension = $8,867 for the year
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.
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How Social Security Credits Work
Qualifying for Social Security isn’t that difficult. Over the course of your working life, you need 40 credits to be eligible for benefits, which is equal to 10 years of full-time work. In 2021, you get one credit for each $1,470 of earnings , up to a maximum of four credits per year.
Social Security calculates your benefit amount based on your earnings over the years, whether you were self-employed or worked for an employer. The more money you earned, the more you paid into Social Securityand the higher your future benefitsup to certain limits. The math is much more complicated than this sounds, but that’s basically how it works.
Appendix: The Option To Adjust Rib
In the following description, it will be useful to keep in mind that widows have to “earn”ARLAs by forgoing widow benefits for 1 or more months before the normal retirement age , much in the same way actuarial adjustments are earned. The ARLA option can be described by the following steps.
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Survivors Are Subject To An Earnings Limit If They Claim The Benefit Before Reaching Full Retirement Age
One of the most difficult and essential duties of a financial adviser is to help a client cope with the death of a spouse. Among the myriad financial decisions that a new widow or widower must make is if, when and how to claim Social Security survivor benefits. Several advisers contacted me over the holidays with questions about survivor benefits.
Barbara in Omaha said shes working with a recent widow whos 63. Her spouse died last July, also age 63. Neither had claimed Social Security yet.
I have had a terrible time getting answers from Social Security Administration on the topic, including disconnected calls and one less-than-polite SSA rep, she wrote. The widow has a small Social Security benefit of $930 per month at her full retirement age. Her spouse would have had a benefit of $2,300 per month.
My question is: Can the widow take discounted benefits on her own record and then at her full retirement age switch to the full retirement age survivor benefit of $2,300? she asked. I had someone at Social Security tell me she could not do that. But language from the Social Security website regarding widow benefits made me believe she could.
Thats the situation another adviser, Ryan from outside of Boston, faced with one of his clients.
Ex-spouses who were married at least 10 years before divorcing and who are single or who waited until age 60 or later to remarry may also be eligible for survivor benefits.
How Much Can You Earn And Still Collect Survivor Benefits
While it can seem unfair to not be able to fully claim both your own and your survivor benefits, there are claiming strategies to maximize what you receive. This includes switching from one benefit to the other. See an example from one of our users directly below.
Making the right decision on how to maximize your own benefits depends on how much your own retirement benefit vs. survivor benefit would be, and how long you think you will be living and needing the money. It also depends on whether youre working.
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Survivors Benefits If You Are Divorced
An ex-spouse is eligible to receive the same benefits as a current spouse if they were married to the deceased worker for at least 10 years and are not currently married. However, if the living ex-spouse remarries before age 60, they forfeit their right to their deceased former spouses Social Securityunless that subsequent marriage ended in death, divorce, or annulment. If the living ex-spouse remarries after age 60, this rule doesnt apply.
How much a spouse or former spouse receives depends on several factors including when they file for benefits and whether they are still working and earning money.
Chapter : How Much Will You Receive In Survivor Benefits
After the passing of the worker, Social Security pays a one-time death benefit of $255 which can be collected by the widow or child.
Then there is the monthly Social Security survivor benefit. That benefit is based on the Social Security benefit the worker was receiving .
The benefit can be up to 100% of what your spouse would have received at full retirement. If the benefit you would receive as a survivor is higher than the benefit you receive on your own, Social Security will pay you the higher of the two amounts, not the two combined. However, survivor benefits, unlike spousal benefits, dont have to be claimed at the same time as your own retirement benefits. You can, in many cases, receive one benefit for a time and then file for the other one later. This is a common strategy for widows to take to maximize their benefits.
Did you Know?
The earliest a widow or widower can apply for survivor benefits is age 60 .
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What To Do If Your Benefits Are Already Being Withheld
If youre subject to the Social Security earnings limit, dont wait for the SSA to start reducing the benefit you receive. Instead, Id recommend voluntarily suspending benefits.
If you wait for the Social Security Administration to discover that youve earned too much working while receiving benefits, your risk of an overpayment notice is higher.
Either way, you arent missing payments that youll never get back. Your benefit amount will be recalculated at your full retirement age to reflect the months that benefits were withheld.
The best way to avoid the earnings limitation is to wait until full retirement age to file for benefits. If you cant wait, make sure you have a clear understanding of how working impacts your Social Security benefits.
If you still have questions, you could leave a comment below, but what may be an even greater help is to join my . Its very active and has some really smart people who love to answer any questions you may have about Social Security. From time to time Ill even drop in to add my thoughts, too.
You should also consider joining the 365,000+ subscribers on my YouTube channel! For visual learners , this is where I break down the complex rules and help you figure out how to use them to your advantage.
Fairness Of Actuarial Adjustments
Are the actuarial adjustments for reduced widow benefits, which would underlie the ARLA option, approximately cost neutral? Consider a widow born before 1940 who files on her 62nd birthday . Assume, for simplicity, that there is no inflation, so that the PIA is constant over the widow’s lifetime . Social Security will pay her × PIA, or 0.829 × PIA, for the rest of her life. The present discounted costs to the program of this benefit streammeasured at the time of the widow’s 62nd birthday using a rate of interest equal to 3 percent and using survival probabilities for all womenis 154.92 × PIA.21 If the widow was to claim her benefit on her 63rd birthday instead, she would receive a benefit equal to × PIA, or 0.886 × PIA, from age 63 until the end of her life. The present discounted costs to the program of this benefit stream, measured at the time of the widow’s 62nd birthday, would be 154.94 × PIA. The costs associated with age 64 and age 65 filing would be 154.04 × PIA and 152.28 × PIA. All these amounts are close, which indicates that the 0.00475 adjustment is approximately cost neutral. For widows born in 1940 or later, the actuarial adjustment is very gradually getting smaller. So, over the near term, the adjustment should still be approximately fair. For widows born in 1962 or later, the adjustment will be 0.00339. That may still be about fair because life expectancy should be higher for later birth cohorts.
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