What Is The Difference Between Survivor Benefits And Spousal Benefits
Spousal Social Security benefits are based on the work history of your living spouse or ex-spouse. Survivor Social Security benefits are claimed by a widow or widower. Spousal benefits are capped at 50% of your spouse’s full benefits, but survivor benefits are not. You can receive the full amount of your spouse’s benefit if you are a widow or widower and have reached full retirement age.
If You Are Still Working And Receiving Old Age Security Payments
If you are still working and your income is higher than $79,845 , you will have to repay part of your Old Age Security pension payment. Delaying your first payment can let you keep more of your pension.
If you are planning on receiving the Guaranteed Income Supplement and your income is less than what you reported on your tax form last year, contact us.
Should You Wait Until You’re Older To Get A Bigger Payout Or Retire Early With A Smaller Payout
“Social Security can act as insurance against living longer than you anticipate, and it provides some inflation protection since your benefit is adjusted for cost-of-living increases,” Tierney said. “The longer you or your spouse expect to live, the more it may make sense to wait to claim your Social Security benefit.”
But just because you decide to wait to claim your benefits doesn’t mean you have to delay your retirement, she explained. However, you should make sure you’ve got income coming in from your 401 or other investments so you can afford your living expenses if you delay claiming your benefit.
However, if you’re solely relying on Social Security benefits to pay for your expenses in retirement, waiting to retire and claiming your benefits at a later date could be a better choice. You’ll receive more money each month and you’ll have more time to save for retirement.
Also, if you choose to retire early, your benefits will be reduced for each month before full retirement age. For instance, if you were born in 1960 or later and retire at age 62 with a retirement benefit of $1,000 per month, your payment would be reduced to $700 .
On the plus side, that’s still $700 you would otherwise not receive during that time if you didn’t draw your Social Security benefits. So you might benefit from collecting payments over a longer period of time.
Is it possible to run out of money after retiring early?
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The 10 Factorsto Consider To Determine When You Should File For Social Security Benefits
When youre making the decisionabout when to file , there are atleast 10 factors that you need to consider to get to the right answer. All ofthese factors are very important to account for but there can be disastrousconsequences for ignoring the last two in particular.
Factor1: Whats Your Gender?
Your decision about when to collect SocialSecurity begins with your gender. The decision to delay or not is moreimportant for women than it is for men. There are two reasons for this:
The decision to file later and get ahigher benefit is possibly more important for a woman to consider. According todata from the Social Security Administration, men usually have a higher benefitamount than the women theyre married to.
If thats your case, you need to exercisecaution filing based on the impact your benefit will have to your wife .
Factor 2: What Does Your Marital History Look Like?
Next, consider your marital history. If you had prior marriages, figure out if you areeligible for benefits from any of those past marriages that could boost yourown benefit.
For example, if you have aneligible deceased spouse or ex-spouse, it could make sense to file for asurvivors benefit as early as age 60 and switch to your own benefit later.
If you have an ex-spousewho is still living you need to figure out if you are entitled to a higherbenefit from the spousal provisions
Who Is Eligible To Collect Social Security Benefits
The specific eligibility requirements for Social Security benefits vary depending on the type of benefits, the age of the person filing the claim and, if you are claiming as a dependent or survivor, the age of the worker.
There is one general requirement, however, that applies to all Social Security programs except for SSI : The worker on whose earnings record the benefit is to be paid must have worked in “covered employment” for a sufficient number of years. This means that the worker must have earned enough of what Social Security calls “work credits” by the time he or she claims retirement benefits, becomes disabled, or dies .
For Social Security retirement benefits, you must be between the ages of 62 and 70 to start collecting benefits.
To check on your eligibility, see Nolo’s article Checking you Social Security Earnings and Benefits or call the Social Security Administration at 800-772-1213.
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Increased Old Age Security Pension At Age 75
If you are or will be 75 years old or older in June 2022, you will get an automatic 10% increase of your Old Age Security pension starting in July 2022.
If you are turning 75 after July 1, 2022 you will receive the increase in the month following your 75th birthday.
The 10% increase in the maximum OAS pension rate will not affect the calculation of your Guaranteed Income Supplement .
Are Taxes Taken Out Of Social Security Checks
Nobody pays taxes on more than 85 percent of their Social Security benefits, no matter their income. The Social Security Administration estimates that about 56 percent of Social Security recipients owe income taxes on their benefits. … The IRS has an online tool that calculates how much of your benefit income is taxable.
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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.
If You Retire Early Could You Potentially Run Out Of Money
While you won’t run out of Social Security benefits , you could exhaust your 401 or other retirement savings. However, you can help prevent that by being conservative with your withdrawal rate if you retire early, Tierney said.
She recommends regularly monitoring your spending and 401 withdrawal rate so you don’t outlive your assets. Forgoing an annual spending increase or reducing spending — especially when the market is down or inflation is high, like we’re experiencing now — can help avoid depleting your retirement savings.
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What Age Should You Collect Social Security
When it comes to retirement planning, you may have heard a lot about the benefits of tax-advantaged retirement accounts, how to choose investments, and maybe some of the details of any pension plans that you’re fortunate enough to have. But what about Social Security? After all, it provides the majority of retirement income for many Americans.
There’s really only one big decision you have to make about Social Security and that’s when to take it. Regardless of your full Social Security retirement age, which ranges from 65 to 67, you can collect retirement benefits as early as age 62 as long as you’ve paid into the program for at least 40 quarters or about 10 years.
However, for each year you delay, your benefit increases by about 8% until age 70. Is it worth the wait? Let’s look at some factors to consider.
When do you plan to retire?
You can receive Social Security benefits once you’re eligible even if you’re still working, but there are a couple of downsides to this. The first is that your wages can cause more of your Social Security income to be taxed.
The second downside is that if you’re under your full retirement age, you lose $1 for every $2 you earn above the earnings limit, which is $18,240 this year. Once you reach full retirement age, your benefits are recalculated to recoup those lost benefits but it can take up to 15 years to break even.
Do you have assets to draw from while you delay benefits?
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.
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You May Be Surprised To Find Out That The Timing For Initiating Social Security Is Different Depending On Your Gender
When it comes to your Social Security benefits, you have a lot of choices regarding when to start getting those monthly checks. In fact, most retirees could begin getting benefits as early as their 62nd birthday or could opt to wait and claim benefits any time up to age 70. Those who file for benefits earlier will get reduced amounts in each check than people who wait, though.
The decision of when to first claim Social Security benefits is a very personal one, as it depends on many factors. These include your job situation, the amount of savings you have, when you want to retire, and whether you have health issues that could affect your lifespan. Admittedly, for many people it’s a tough choice.
If you’re trying to decide, or you’re not yet near retirement and you want to get an idea of when you might claim benefits, it can be helpful to know the most popular age to start Social Security.
Can I Collect More Than One Type Of Benefit At A Time
No. You may qualify for more than one type of Social Security benefit at a time, but you can collect just one. For example, you might be eligible for both retirement and disability, or you might be entitled to benefits based on your own retirement as well as on that of your retired spouse. You can collect whichever one of these benefits is higher, but not both.
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Bridge To Medicare At Age 65
Remember that while you are eligible for reduced Social Security benefits at 62, you won’t be eligible for Medicare until age 65, so you will probably have to pay for private health insurance in the meantime. That can eat up a large chunk of your Social Security payments.
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You’re Only Working Part Time
If you claim Social Security prior to your full retirement age while still holding down a part-time job, you might have your benefits reduced if your work income exceeds the annual limit. For 2022, if you are under full retirement age, your benefits go down by $1 for every $2 your income exceeds $19,560. If you reach full retirement age in 2022, your benefits go down by $1 for every $3 your income exceeds $51,960 prior to reaching full retirement age. If you’re working part-time to help make ends meet, taking Social Security at 62 might make sense.
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Factors That Affect Social Security Benefits
The math seems to say that everyone should wait until age 70 to reap the best benefits, but this isnt always the case. There are times when it might make sense to start collecting earlier. If, for example, you are in poor health or if the family breadwinner is ill and can no longer work, collecting before your full retirement age could help prevent debt from mounting up.
Your marital status also plays a factor. If youre single and in poor health, you could end up using your savings to pay for medical bills between the ages of 66 and 70. In this case, you might be better off collecting Social Security benefits at a lower rate than holding out for the higher payments youd receive at age 70.
If, however, youre single, in good health and either still working or have plenty of savings, consider waiting until age 70 in order to benefit from the higher payments.
With married couples, it could be best for the spouse who earns the most money to hold off until 70, while the spouse who makes less starts collecting at 62. This approach will ensure that when one of you passes away, the surviving spouse will receive the higher benefitsgenerally the amount their spouse would have received at age 70, even if the spouse died before that age.
For more help with retirement planning, consider contacting a Certified Financial Planner. They can help you ensure youre maximizing your Social Security benefits and answer any questions you have about your other assets.
What To Consider When Deciding The Best Age For Social Security Benefits
Youll receive reduced monthly benefits permanently if you start taking them before you reach full retirement age. And the reductions arent small. This breakdown summarizes how much you can lose depending on when you get your retirement benefits:
- Benefits are reduced by 30% if you opt to start receiving benefits just five years early.
- If you wait until you full retirement age youll receive 100% of your benefits.
- You can also elect to postpone benefits beyond full retirement age, up until you are 70.
- The monthly amount you will receive in the future increases each month you wait to start receiving benefits.
- If you can wait until the last possible month, your check will be 132% of the full retirement benefit.
For a fuller comparison, this table from the Social Security Administration shows how much you could get if you retire at age 62 based on your birth year:
|Social Security Administration Early Retirement at Age 62|
So, its almost always best to delay Social Security benefits for as long as you can. If you plan to work in retirement, youll definitely want to delay. Youll face a penalty if you continue to work after you claim early retirement benefits and earn more than the yearly earnings limit, which for the 2021 tax year is $18,960. This means that the Social Security Administration will deduct $1 from benefits for every $2 that you earned over $18,960. For the 2022 tax year, the yearly earnings limit is $19,560.
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You Already Have Your 35 Highest
Your Social Security benefits are based on your earnings in the 35 years that you had the most compensation. If youre in your peak earning years, you could boost your benefits if you keep working a few more years and delaying your benefits. However, if you arent going to increase your average earnings, such as if youre only working part-time or youve had to retire early, you wont miss out on the chance to boost your benefits with higher earning years. However, youll still receive a smaller benefit for not waiting until full retirement age.
How To Calculate Your Social Security Break
Deciding when to take Social Security retirement benefits is important because it can directly affect your benefit amount. While you can technically start taking benefits as early as 62, youd receive them at a reduced amount. On the other hand, you could delay taking benefits up to age 70. Calculating your Social Security break-even age can help you decide when the best time is to begin taking benefits. You can do that using a Social Security break-even calculator. Additionally, it may be a good idea for you to consult with a financial advisor about when its best for your particular situation to begin receiving Social Security.
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Claiming Social Security At Age 62
At age 62, the earliest point at which most people can claim benefits, youll receive around 70 percent of the amount that you would receive at your Full Retirement Age. If you were born in 1958, and your full benefit at retirement would be $1,000 a month, you would shrink your benefit to around $700 a month by retiring at age 62. Under most circumstances, once you claim your benefit, it stays at that amount for the rest of your life. Consequently, by retiring early you could lose out on $300 a month every month for the rest of your life.
After you turn 62, the amount of your Social Security benefit rises by about a half a percentage point each month. So, at age 63 you would receive about 77 percent of your benefit
If you work after claiming your benefit, one of two things can happen:
- If you earn less than the earnings limit, which for 2020 is $18,240, then your benefits will not be affected.
- If you earn more than the earnings limit, Social Security will deduct $1 for each $2 you earn over the limit. Social Security will, after full retirement, adjust your benefit to reflect this deduction so the money will eventually be restored to you.