What If I Change My Mind
If you receive Social Security benefits at a reduced rate but then change your mind, you have the option of withdrawing your application within the first 12 months of receiving benefits and paying back to the government what you’ve already received . Then, you could restart benefits at a later date to take advantage of a higher payout. Be aware that you’re limited to one withdrawal per lifetime.
For example, let’s say you elected to receive early benefits at age 62 but then decided to go back to work at age 63. You could withdraw your Social Security application, pay back the years’ worth of benefits you received, go back to work, and then wait until your full retirement age to restart your benefit checks at a higher level.
Once you reach full retirement age, another option is to voluntarily stop benefits at any point before age 70 to receive delayed retirement credits . Benefits will automatically restart at age 70 at a higher amountâunless you choose to start taking benefits before then. Note that when you withdraw your application or stop your benefits after full retirement age, you must specify if your Medicare coverageâif you have itâshould be included in the withdrawal.
How The Ssa Calculates Benefits
For an in-depth look at how the government reaches these numbers, see our article on How Social Security Is Calculated. The quick-and-dirty, however, is that the program is based on AIME, or “Average Indexed Monthly Earnings.”
To calculate this, the government takes the highest-earning 35 years of your working life, caps them at the maximum taxable income for FICA taxes and averages them together to create a representative annual income. It divides by 12 to get a monthly income, which is the AIME.
The government then runs your AIME through a three-tiered formula to calculate your Primary Insurance Amount . The formula always uses the same percentages, but the specific cutoffs change from year to year. At time of writing the PIA formula is:
- 90% of AIME up to the first $960,
- 32% of AIME greater than $960, less than $5,785, and
- 15% of AIME greater than $5,785.
So if you earned $60,000 per year for your entire life and turned 62 in 2020, you would have an AIME of $5,000. The Social Security Administration would calculate your benefits as follows:
- 90% of AIME up to the first $960: 0.9 x 895 = 864
- 32% of AIME between $960 and $5,785: .32 x 4,040 = 1,292.80
- 15% of AIME greater than $5,785: .15 x 0 = 0
- You would collect $2,156.80 per month in benefits.
How To Get The Maximum Social Security Benefit You’ve Earned
Say that someone who turned age 62 in 2021 will reach FRA at 66 years and 10 months, with earnings that make them eligible at that point for a monthly benefit of $1,000. Opting to receive benefits at age 62 will reduce their monthly benefit by 29.2%, to $708, to account for the longer time that they could receive benefits, according to the Social Security Administration . That decrease is usually permanent.
If that same person waits to get benefits until age 70, their monthly benefit increases to $1,253. The larger amount is due to the delayed retirement credits earned for the decision to postpone receiving benefits past FRA. In this example, that higher amount at age 70 is about 77% more than the benefit that they would receive each month if benefits started at age 62a difference of $545 each month.
Of course, the best time for someone to start taking Social Security benefits depends on a variety of factors, not just the dollar amount of the benefit. Things such as current income and employment status, other available retirement funds, and life expectancy also must be factored into the decision.
The SSA has calculators to help you estimate your benefits.
Read Also: Tax Benefits Of Charitable Donations
To Wait Or Not To Wait
Consider taking benefits earlier if . . .
- You are no longer working and can’t make ends meet without your benefits.
- You are in poor health and don’t expect the surviving member of the household to make it to average life expectancy.
- You are the lower-earning spouse, and your higher-earning spouse can wait to file for a higher benefit.
Consider waiting to take benefits if . . .
- You are still working and make enough to impact the taxability of your benefits.
- Either you or your spouse are in good health and expect to exceed average life expectancy.
- You are the higher-earning spouse and want to be sure your surviving spouse receives the highest possible benefit.
Watch How Much You Earn In The Years Preceding Full Retirement
The SSA has imposed earning limits for individuals who have entered early and full retirement. Those limits, and the impact on your earnings, depend on how close you are to your full retirement age.
In 2022, an early retiree can make $19,560 in gross wages or net self employment earnings without penalty. Any overage will result in $1 deducted from the Social Security check for every $2 earned above this amount. Once you reach the year of your full retirement age, you can bring in $51,960 prior to the month of your full retirement birthday without penalty. For every $3 earned above this amount, the SSA will deduct $1 from your Social Security payment. These limits also affect the amounts family members can receive from your claim.
Once youve reached full retirement age, earnings do not impact your benefits.
You May Like: How Can I Estimate My Social Security Benefits
Are Social Security Benefits Taxable
If you have a lot of income from other sources, up to 85% of your Social Security benefits will be considered taxable income. If the combination of your Social Security benefits and other income is below $25,000, your benefits wonât be taxed at all. The amount of your benefits that is subject to taxes is calculated on a sliding scale based on your income. Money that Social Security recipients pay in income taxes on their benefits goes back into funding Social Security and Medicare.
If your retirement income is high enough that your benefits are taxable, how do you pay those benefits? You can ask Social Security for an IRS Voluntary Withholding Request Form if youâd like the government to withhold taxes from your Social Security benefits. Otherwise, youâre expected to file quarterly tax returns to pay these taxes over the course of the year.
That covers federal income taxes. What about state income taxes? That depends. In 12 states, your Social Security benefits will be taxed as income, either in whole or in part the remaining states do not tax Social Security income.
Or Go All The Way And Work Until 70
The longer you hold off receiving your Social Security benefits, up to age 70, the bigger your check. So each month after youve reached your FRA, your payout increases by roughly 0.7% percent , which amounts to 8% per year. If you wait till age 70 then, your payments will be 32% bigger than if you had started taking benefits at 66. Once you turn 70 though, there is no added benefit in postponing payments.
Of course, working until 70 isnt for everyone, and theres no penalty in claiming your benefits when you reach your FRA. At that time, you will receive 100% of your benefit. Its also not a sure thing that waiting until 70 maximizes your lifetime benefit. After all, should you pass away the following year, waiting that long will mean you received far less total benefits than if youd claimed them as soon as you were eligible to. So consider your life expectancy as you make this decision.
You May Like: Social Security And Retirement Benefits
Born In 1955 Or Later You May Have To Work Until Youre 67
Once upon a time, turning 65 years old meant you could get your full Social Security retirement benefits and Medicare coverage at the same time. But over the last couple of years, the Social Security Administration changed the full retirement age twice first to age 66 for people born from 1948 to 1954, then again to age 67 for people born in 1955 or later.
No matter what full retirement age is required for you to get full Social Security benefits , Medicare eligibility still begins at age 65.1
|Year of birth|
66 years and 2 months
66 years and 4 months
66 years and 6 months
66 years and 8 months
66 years and 10 months
How To Get The Maximum Social Security Benefit
Few people receive the maximum Social Security check from the government. To defy this and potentially become one of a small handful to bag $4,194 per month, youll need to be a high earner over many decades and delay receiving the benefits.
The checklist is as follows:
Read Also: Grocery Benefit For Medicare Recipients
Ssa Benefits And Medicare
So lets go back to how your full retirement age and Medicare may interact. The biggest thing is that in the past, at age 65, you both got your SSA benefits and became Medicare eligible. This meant you could use your SSA benefits to help pay for Medicare. However, with the full retirement age being at least a year or more past 65, you need to think carefully about when you take your SSA benefits if you want to use them for Medicare costs.
What If I Take Benefits Early
If you choose to take your own Social Security benefit before your full retirement age, be aware that the benefit is permanently reduced by five-ninths of 1% for each month. If you start more than 36 months before your full retirement age, the worker benefit is further reduced by five-twelfths of 1% per month for the rest of retirement.
For example, let’s assume you stop working at age 62. If your full retirement age is 67 and you elect to start benefits at age 62, the reduced benefit calculation is based on 60 months. So, the reduction for the first 36 months is 20% and then another 10% for the remaining 24 months. Overall, your benefits would be permanently reduced by 30%.
You May Like: Calculate Your Social Security Benefit
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 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.
Ask Rusty Will My Work Earnings Affect My Social Security Benefits
Dear Rusty: I am presently 67 years of age and am still working full time. I am receiving Medicare coverage, but I have not yet applied for monthly Social Security payments. I have been told that I can take SS payments even if I am still working. Is that correct? Is there a limit to how much I can earn each year and still receive SS payments? Signed: Working but Wondering
Dear Working: Social Securitys so-called earnings test applies only to those who havent yet reached their full retirement age. At 67 years of age, you are already past your SS full retirement age of 66 years and 2 months, which means there is no longer a limit to how much you can earn from working. Regardless of how much you earn, your monthly Social Security benefits will not be affected, so you can claim your Social Security at any time and not worry about your benefits being affected.
This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundations staff, trained and accredited by the National Social Security Association . NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website or email us at .
We hope you’ve enjoyed this article. While you’re here, we have a small favor to ask…
Read Also: Habitat For Humanity Employee Benefits
Offer From The Motley Fool
The $18,984 Social Security bonus most retirees completely overlook: If you’re like most Americans, you’re a few years behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $18,984 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. Simply click here to discover how to learn more about these strategies.
The Motley Fool has a disclosure policy.
The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.
What Is The Maximum Social Security Benefit At Age 62
The earliest age you can file for Social Security retirement benefits is age 62. For those who file for Social Security in 2020, the maximum they could receive at age 62 is $2,265 per month. Before you get excited, if you had the income history to get the maximum Social Security benefit in 2020, that would represent a significant drop in your income during retirement, assuming you dont have substantial assets to make up the difference.
If you are financially independent and retiring early by choice, claiming Social Security at 62 may make sense. On the other hand, if you find yourself out of work and looking for money to get by, look for alternatives. Give the economy time to recover from the coronavirus pandemic so that you can go back to work. Exhaust all stimulus checks, unemployment, severance, or even unused vacation pay that may be at your disposal.
In case you were wondering if you turn 62 this year, your full retirement age is 66 and 8 months.
What is the Maximum Social Security Benefit at Age 67?
When it comes to Social Security for the year 2020, the full retirement age is 66 and 2 months. For most people reading this, your full retirement age will likely be closer to 67. That being said, the maximum Social Security benefit for someone at full retirement age in 2020 is $3,011 per month.
Want the Maximum Social Security benefit in 2020? Wait until age 70 to claim benefits.
You May Like: Early Retirement Social Security Benefits
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.
Eligible Family Members Include:
- Ex-spouses, if the marriage lasted for at least 10 years and they have not remarried
- Children under 18, or up to 19 if still enrolled in high school
- Children of any age who were disabled before 22 — that is, not earning more than $1,260 per month in 2020, having a medical condition that results in severe functional limitations and that is expected to last 12 months or longer or result in death
Spouses and ex-spouses must be at least 62 in order to claim benefits, and spouses and children must wait for the worker to begin claiming benefits themselves before they can claim family benefits on their record.
You May Like: Medicare Eligibility And Benefits Verification