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.
Social Security Auxiliary Benefits
In addition to the individual benefit the primary earner can claim, eligible family members each can claim auxiliary benefits of up to 50% of the primary earners benefits. The maximum family benefit comes into play when two or more family members claim auxiliary benefits based on one primary earners record.
For example, say a familys primary breadwinner retires at full retirement age and is eligible for a benefit of $2,000 a month. A non-working spouse with no earnings record who has reached full Social Security retirement age can claim an auxiliary benefit of $1,000 a month, equal to 50% of the primary breadwinners earnings record.
Combining the primary breadwinners $2,000 benefit with the spouses $1,000 auxiliary benefit makes a total of $3,000 in Social Security benefits for one family. There is no need to figure the maximum family benefit here, because it only applies when two or more family members claim benefits based on one persons earning record.
Now lets say also that the couple has an adult child who, because of a disability, is also eligible to be paid 50% of the primary breadwinners benefit. This would come to another $1,000 and, added to the benefits paid to the primary breadwinner and non-working spouse, bring the familys total benefit to $4,000.
Social Security At Age 62
The table below shows the effect of early retirement on Social Security benefits for both a retired worker and his/her spouse if they start collecting benefits at age 62.
For this illustration, a Social Security benefit amount of $1,000 at Full Retirement is used.
| Year of | |
|---|---|
| 325 | 35.00% |
As you can see from the table above, depending on the year you were born, youll receive between 20 and 30 percent less per month if you collect Social Security benefits at age 62 than if you wait until full retirement age to begin collecting benefits.
Additionally, if you are claiming benefits as a spouse, youll receive between 25 and 35 percent less per month if you collect Social Security benefits at age 62 than if you wait until full retirement age to begin collecting benefits.
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Maximum Family Benefit Basics
The maximum family benefit allowed by Social Security is different from the maximum individual benefit. The maximum family benefit only affects benefits paid to other eligible family members. These may include spouses, minor children, disabled adult children and dependent parents.
The Social Security Administration uses a complicated formula to set the precise limit a family can receive. You can get a quick estimate of your family maximum benefit by checking your My Social Security account at SSA.gov. If you dont have a My Social Security Account, it may be a good idea to open one.
After logging into My Social Security, look for the section near the bottom of the first page labeled, Your family qualifies for Survivors Benefits. Then, click on the link labeled, Learn more about Survivors Benefits. The table that pops will display your maximum family benefit at the bottom.
Cost Of Living Adjustment Rises
The SSA has announced that benefit checks will rise 8.7 percent in 2023, a substantial increase even from the 5.9 percent adjustment for 2022, which was already unusually high. In fact, the 2023 COLA is the highest increase since 1981, when it was 11.2 percent.
The 8.7 percent adjustment will amount to a $146 increase in monthly benefits for the average retired worker on Social Security, beginning in January. Specifically, the average check for retired workers will increase from $1,681 to $1,827. For a couple with both partners receiving benefits, the estimated payment will increase from $2,734 to $2,972, a rise of $238.
Since 1975, the SSA has tied cost of living adjustments to the Consumer Price Index for urban wage earners and clerical workers . The SSA compares the third-quarter CPI-W for the prior year to the third-quarter CPI-W in the current year to determine the COLA. It then adjusts the COLA based on the difference in CPI-W from one year to the next.
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How Can I Get The Most Out Of My Social Security Benefit
There are a few things you can do to make sure you get the most out of your Social Security benefit. First, you should start taking your benefit as early as possible. You can start receiving benefits as early as age 62, but if you wait until your full retirement age, youll get a higher monthly benefit.
Second, you should make sure you have enough credits to qualify for benefits. You earn credits by working and paying Social Security taxes. Generally, you need 40 credits to qualify for benefits.
Finally, you should know that your benefit amount is based on your earnings history. So, if you want to maximize your benefit, youll need to have a long and consistent work history with high earnings.
How Much Will You Get From Social Security
As of March 2022, the average Social Security retirement benefit was $1,665 per month — far below the maximum. The program is designed to provide a benefit that replaces about 40% of the typical American’s pre-retirement income. It’s not intended to be sufficient as a person’s sole source of cash in retirement.
The best place to get a personalized estimate of your future benefit is to log in to your “my Social Security” account and view your most recent statement. Among other information, it will include an estimate of how big your benefit will be at full retirement age, as well as estimates for what you would receive if you claimed Social Security early or late, based on your actual work record.
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How To Maximize Your Social Security
Social Security’s formula makes qualifying for the maximum benefit tough. Not only will you need to have a 35-year work history, you’ll also need to have earned income at or above the annual taxable limit in all of those years. That’s no easy feat given the average American worker is earning about $51,000 per year, yet the maximum taxable limit for Social Security is $142,800 in 2021.
Nevertheless, there are strategies you can use to make sure you get the biggest benefit possible even if you don’t qualify for the maximum Social Security amount.
For example, working at least 35 years eliminates zeros in your average monthly income calculation and delaying retirement may allow you to replace lower income earning years from the beginning of your career with higher earning years later in life, boosting your benefit, too.
You can also wait until age 70 to start receiving benefits to capture increases associated with delayed retirement credits. The difference between claiming benefits at age 62 and age 70 is substantial. For example, if your full retirement age is 67 and your full retirement benefit is $1,000, then you’d only receive 70% of your full retirement age benefit, or $700 per month, if you claim at age 62. However, if you wait to claim until age 70, you’d receive 124% of your full retirement benefit amount, or $1,240 per month. That’s 77% more money than you’d collect at age 62.
Get Ssa Benefits While Living Abroad
U.S. citizens can travel to or live in most, but not all, foreign countries and still receive their Social Security benefits. You can find out if you can receive benefits overseas by using the Social Security Administrations payment verification tool. Once you access the tool, pick the country you’re visiting or living in from the drop-down menu options.
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How Do Benefits Work And How Can I Qualify
While you work, you pay Social Security taxes. This tax money goes into a trust fund that pays benefits to:
- Those who are currently retired
- To people with disabilities
- To the surviving spouses and children of workers who have died
Each year you work, youll get credits to help you become eligible for benefits when its time for you to retire. Find all the benefits Social Security Administration offers.
There are four main types of benefits that the SSA offers:
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Learn about earning limits if you plan to work while receiving Social Security benefits
The Maximum Social Security Benefit And How To Get It
As mentioned above, in 2022, the maximum Social Security benefit is $3,345 per month if you started receiving benefits at full retirement age . Theres only one way to get more than that: wait until age 70 to receive the true maximum benefit of $4,194. But for most people, receiving even $3,345 is a stretch. Heres what you would need to do to maximize your benefit.
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Are You Saving For Retirement
While the Social Security retirement benefit is a great source of additional retirement income, you shouldnât rely on it to cover all of your expenses. The 2022 maximum amount of $4,194 per month might sound like a reasonable amount but, the average American is receiving much less. If you have dreams of traveling in retirement or pursuing new hobbies, youâll need money to do so. If you havenât started saving for retirement, make today the day you start. Your future self will thank you!
How Much Do You Have To Make To Get Maximum Social Security
To receive the maximum Social Security benefit, youd need to earn at least the maximum wage taxable by Social Security for 35 years and delay claiming the benefit until you reach 70. The earnings cap adjusts every year based on changes to the national average wage index and is $147,000 in 2022, up from $142,800 in 2021.
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Fact #: Social Security Lifts Millions Of Older Adults Above The Poverty Line
Without Social Security benefits, about 4 in 10 adults aged 65 and older would have incomes below the poverty line, all else being equal, according to official estimates based on the 2021 Current Population Survey. Social Security benefits lift more than 16 million older adults above the poverty line, these estimates show.
An important study on retirement income from the U.S. Census Bureau that matches Census estimates to administrative data suggests that the official estimates overstate older people’s reliance on Social Security. The study finds that in 2012, 3 in 10 older adults would have been poor without Social Security, and that the program lifted more than 10 million older adults above the poverty line.
No matter how it is measured, its clear that Social Security lifts millions of older adults above the poverty line and dramatically reduces their poverty rate.
The Problem: The Economic Toll From The Pandemic Will Very Likely Affect Social Security Benefits
The initial retirement benefits that Social Security beneficiaries receive in the first year of retirement are determined by a formula that depends, in part, on the growth of average wages in the economy. Due to the economic fallout from the COVID-19 pandemic, the key measure of average wagesthe average wage index is very likely to decline in 2020. As a result, the initial retirement benefits for those who are first eligible to receive benefits in 2022when they reach the age of 62would be significantly less than what was anticipated only months ago, before the pandemic began to exact its economic toll. The effect is very likely to be so significant that workers turning 62 in 2022 would receive initial retirement benefits that are less than those of workers who were born a year earlier and who had essentially the same earnings history. This incongruity is what Social Security experts call a benefit notch. Such a notch would be unfair to the beneficiaries who turn 60 in 2020 and first become eligible to retire in 2022 because benefits are normally expected to grow for each successive cohort of retirees. Moreover, the benefit reduction and notch would have long-lasting consequences, as they not only would affect benefits in the first year of ones retirement but also lower them for every year going forward, as annual benefits are determined by adjusting the initial level for inflation.
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How Social Security Adjusts Family Benefits
Social Security adjusts the auxiliary benefits it pays to keep the family benefit below the maximum. The primary earners benefits are never reduced due to the family benefit exceeding the maximum allowed. Only auxiliary benefits are reduced.
The reduction gets distributed equally among the family members receiving auxiliary benefits. In the above example, the spouse and the child would each have their benefits reduced by $200 to keep the family benefit from exceeding the maximum of $3,600.
The benefits paid to each auxiliary recipient may change over time. For instance, minor dependent children getting auxiliary benefits will stop being eligible, in most cases, after age 18. As that happens, the auxiliary payments going to other family members increase up to the maximum.
What’s Full Retirement Age
Full retirement age is when you’re eligible to receive full Social Security benefits. Your full retirement age depends on your birth year: For anyone born in 1960 or later, full retirement age is 67. For those born in 1955 through to the end of 1959 , full retirement age ranges between 66 and 2 months and 66 and 10 months. If you were born before 1955, you’ve already reached age 66 and full retirement age.
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Social Security At Full Retirement Age : What It Means
Full retirement age is when the SSA considers you to be receiving your full benefits. This means that your benefits arent considered to be reduced, as at age 62.
That said, the term full retirement age is a tad confusing. It doesnt mean you have to be fully retired. And its not that youre getting the maximum amount. That kicks in at age 70 .
Your FRA is based on the year you were born. For those born in 1960 or later, full retirement age is 67. For those born between 1943 and 1960, its roughly 66 . If you were born on January 1 of a given year, you would use the prior year to determine your FRA.
Waiting until FRA to claim Social Security might be tough for some people, but it does increase your benefit by up to 30% versus claiming at age 62.
Maximum Social Security Benefit At Age 62 Summary
Heres the bottom line:
Claiming Social Security at 62 in 2022 mean you will receive less than you would have if you waited until your full retirement age .
In 2022, if you start collecting Social Security at 62, the maximum benefit you can receive is $2,364.
This is compared with a maximum benefit of $3,345 at full retirement age.
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What Is Social Security
Social Security is a federal government program that provides benefits to retirees, disabled individuals, and survivors of deceased workers. The program is funded by payroll taxes paid by workers and their employers. Workers earn credits towards benefits based on their earnings.
The maximum Social Security benefit is available to workers who have earned the maximum number of credits. For 2019, the maximum benefit is $2,861 per month for workers who retire at age 66. The maximum benefit increases to $3,503 per month for workers who delayed retirement until age 70.
How Much Social Security Will I Get If I Make $100000 A Year
Here’s how much your Social Security benefits will be if you make anywhere from $30,000 to $100,000 per year. The average Social Security benefit is around $1,544. With inflation on the rise, retirees are expected to get as much as a 6% cost-of-living increase in their 2022 checks to shore up their budgets.
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Maximum Family Benefit Exceptions
The maximum family benefit applies differently in some situations. For example, an ex-spouse is usually entitled to claim benefits based on his or her former spouses earnings record. These benefits dont count against the maximum family limit.
A non-working spouse who retires before reaching full retirement age could qualify for a reduced percentage of the primary breadwinners benefits. And if a family has two earners who are both eligible for benefits, each spouse can receive 100% of their own benefit, even if this would put the family over the maximum. This is because it only applies to benefits that can be claimed based on one earners record.
Another special case is when a minor dependent child is entitled to receive benefits from both retired parents. Then, Social Security uses a different limit, called the combined family maximum. The family maximum in this case can be as high as the total of both parents calculated family maximum, as long as it doesnt exceed the combined family maximum.