Theres A Social Security Spousal Benefit
Marriage is rewarded when it comes to Social Security. One spouse can take whats called a spousal benefit, worth up to 50% of the other spouses Social Security benefit. For example, if your monthly Social Security benefit is worth $2,000 but your spouses own benefit is only worth $500, your spouse can collect a spousal benefit worth $1,000 bringing in $500 more in income per month.
Just as the benefit based on your own work history is reduced if you claim it early, the same is true for a spousal benefit. That 50% figure is the maximum amount that only a spouse who is at least full retirement age is eligible for. Taking the spousal benefit early at, say, age 62, reduces the amount to as little as 32.5% of the higher earners benefit. If you take your own benefit early and then later switch to a spousal benefit, your spousal benefit will still be reduced.
How Are My Social Security Benefits Calculated
Social Security benefits are based on your 35 highest-paid working years, with some adjustments made for inflation. Earning $100,000 in 1970 is very different than making $100,000 in 2021. I wont bore you with the specific details of the inflation adjustments here. Those who work less than 35 years will see lower benefits. So, working past 70 could help fill in the year with zero income or lower than average incomes. Shorter working histories are common for people with several years of schooling or parents who left the workforce to raise children. It could also apply to people who took time off work to care for an aging parent.
To get your final benefit, the Social Security Administration calculates your Average Indexed Monthly Earnings or AIME. Your AIME is computed by dividing the sum of all your indexed wages by 420. Eventually, your actual Social Security benefit amount is calculated based on a variety of factors, such as the age at which you start collecting benefits. Remember, benefits will be lowered if you start taking them before full retirement age.
What Is The Average Social Security Benefit At Age 70
Social Security was never meant to replace 100% of a workers income in retirement. However, among elderly Social Security beneficiaries, about 12% of men and 15% of women still rely on Social Security benefits for 90% or more of their income.
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Regardless of whether Social Security is your primary source of income or just a supplement to your personal savings, there are steps you can take to maximize your benefit. One of those is to defer claiming until age 70, which is the latest age you can file for benefits. Heres what the average Social Security payout is at age 70, along with a brief description of how benefits work.
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How To Get The Maximum Social Security Benefit
Your Social Security retirement benefits are based on a combination of when you are taking benefits and your earning history. Waiting until age 70 will give you the largest monthly Social Security benefit. For 2021, the maximum Social Security benefit at age 70 is just $3,895 per month or $46,740 per year. This amount can increase with the Social Security cost-of-living adjustment , set to 5.9% for 2022.
Average Social Security Benefit At 70
As of December 2021, the most recent year for which data is available, the average Social Security benefit at age 70 was $1,768.94. This is up 8.3% from December 2020, when the average benefit for a 70-year-old was $1,632.82.
Bear in mind that the average Social Security benefit at age 70 is by definition higher than the average Social Security benefit for all retirees, as 70 is the latest age at which you can file for benefits. As of January 2022, the overall average benefit was $1,657.
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Is Your Full Retirement Age Affected By Where You Live
Your FRA is not affected by where you live. Most Social Security rules, including those that determine benefit amount and claiming age, are set by federal law. However, some states do tax Social Security benefits, so where you live can affect tax levels on your retirement income. But again, the age at which you claim benefits won’t affect your tax rate — your income is the key factor.
When Is The Best Time To File For Social Security Benefits
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Deciding the age at which you will begin to collect Social Security is likely to be a big factor in your retirement planning. Many retirees look forward to the day that they can apply for the benefits theyve spent their whole careers paying for. However, if you have a substantial nest egg and dont need the extra funds immediately, it may be in your best interest to wait a few years before claiming your benefits.
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Social Security Income Limits
The Social Security Administration reported in October 2021 that the estimated average monthly retirement benefit will be $1,657. While that regular monthly income helps, it’s usually not enough to cover living expenses. That’s one reason many people are working longer.
If you work, the money you bring home can affect your Social Security benefitsbut the specifics depend on your age and how much you earn. Remember that, although your full retirement age might be 67, you can start receiving benefits at 62, even if you’re still working.
But here’s the catch: For the 2021 tax year, if you start benefits before full retirement age, you can only earn up to $18,960 and still get your full benefits. Once you earn more than the limit, Social Security deducts $1 from your benefits for every $2 you earn.
In the year you reach full retirement age, Social Security becomes more forgiving. If you earn more than $50,520 it deducts $1 for every $3 you earnbut only during the months before you reach full retirement age. Once you reach full retirement age, you can earn any amount of money, and it won’t reduce your monthly benefits.
Note, however, that any money deducted from your benefit is not permanently lost. After you reach full retirement age, Social Security will recalculate your benefit and increase it to account for the benefits that it withheld earlier.
Can I Collect Social Security And Still Work At Age 70
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So, yes, if you continue to work, you‘ll continue to pay into Social Security and other payroll taxes. Fortunately for you, since you‘re past your full retirement age , there’s no benefit reduction based on income .
Secondly, what happens to my Social Security if I stop working before retirement age? Quitting work before you’re old enough to claim benefits won’t reduce that amount when you do claim it. But if you stop work now, your benefit won’t get any larger. Social Security benefits are based on your highest 35 years of earnings. If you continue working, you’ll reduce those zero years and drive your benefit up.
Secondly, how much can I earn after age 70?
In the year you reach full retirement age, you can earn up to $46,920 without having a reduction in benefits. However, if you exceed $46,920 in earnings, Social Security will deduct $1 from your benefits for each $3 you earn until the month you reach full retirement age.
How many months before I turn 70 should I apply for Social Security?
Applications for Social Security benefits can only be processed a maximum of four months before benefits are scheduled to begin. Thus, the earliest you can apply is age 61 and nine months, and you can expect to receive your first payment four months laterthe month after your birthday.
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Your Monthly Social Security Benefits Increase The Longer You Wait To Claim
While you can collect Social Security benefits as soon as you turn 62, taking benefits before your full retirement age will spell a permanent reduction in your payments of as much as 25% to 30%, depending on what your full retirement age is.
If you wait until you hit full retirement age to claim Social Security benefits, youll receive 100% of your earned benefits. But you can do even better by waiting to claim your Social Security benefits at age 70 your monthly Social Security benefit will grow by 8% a year until then. Any cost-of-living adjustments will be included, too, so you dont forgo those by waiting. Think of that time as bonus earning years and remember that youd be hard pressed to find those sorts of gains for zero risk during that period anywhere else.
Waiting to claim your Social Security benefits can help your heirs as well. By waiting to take her benefit, a high-earning wife, for example, can ensure that her low-earning husband will receive a much higher survivor benefit in the event she dies before him. That extra income of up to 32% could make a big difference.
C You Can Continue Working And Not Receive Your Retirement Benefits
If you decide to continue working and not start your benefits until after full retirement age, your benefits will increase for each month you do not receive them until you reach age 70. There is no incentive to delay filing for your benefits after age 70. Continuing to work may also increase your benefits, because your current earnings could replace an earlier year of lower or no earnings, which can result in a higher benefit amount.
If you are not receiving your Social Security benefits when you turn 65, you will need to apply for Original Medicare three months before you turn 65. If you dont sign up for Medicare Part B when youre first eligible at age 65, you may have to pay a late enrollment penalty for as long as you have Medicare coverage.
However, if you or your spouse are still working and covered under an employer-provided group health plan, talk to your personnel office before signing up for Medicare Part B. Once the covered employment ends, you may be eligible for a Special Enrollment Period to sign up for Part B. If so, you wont have to pay a late enrollment penalty.
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You Can Receive Benefits Before Your Full Retirement Age
You can start receiving your Social Security retirement benefits as early as age 62, but the benefit amount will be lower than your full retirement benefit amount.
If you start receiving your benefits before your full retirement age, we will reduce your benefits based on the number of months you receive benefits before you reach your full retirement age.
If you wait until age 70 to start your benefits, your benefit amount will be higher because you will receive delayed retirement credits for each month you delay filing for benefits. There is no additional benefit increase after you reach age 70, even if you continue to delay starting benefits.
Heres How Working After 62 Can Change Your Social Security Benefits
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Continuing to work after age 62 can affect your level of Social Security retirement benefits, whether you are receiving benefits at the time or not. Knowing how continuing to work might change benefit levels can lead to better decisions about when to claim benefits and whether to continue working.
You can begin claiming Social Security retirement benefits as early as age 62, whether you are working or not. You know that the level of benefits increases for each year you wait to claim them through age 70. Theres no benefit for delaying claiming past age 70. In addition, the level of benefits might increase if you continue working after 62, whether you claim benefits at 62 or later.
Social Security retirement benefits are calculated using your 35 highest-earning years. If you dont have 35 years of earnings, youll be assigned an income of $0 for each of the missing years. After you turn 62, Social Security recalculates your benefits every year that you dont claim benefits. It will take your earnings for the latest year, add that to your record of lifetime earnings and select the 35 years with the highest inflation-adjusted earnings. Those are the only details of how benefits are calculated you need for this discussion.
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B You Can Stop Working And Start Receiving Your Retirement Benefits
If you make the decision to stop working and start receiving retirement benefits before your full retirement age, your benefits are reduced a fraction of a percent for each month before your full retirement age. Also, your benefits will not increase because of additional earnings.
We calculate your benefits based on your highest 35 years of earnings, and if you stop working before you have attained 35 years of earnings or you have years with low earnings, this will affect your benefit calculation.
If you delay your benefits until after full retirement age, you will be eligible for delayed retirement credits that would increase your benefit.
If you stop working and start receiving retirement benefits before age 65, you are automatically enrolled in Original Medicare when you turn 65. If you are not receiving your Social Security benefits when you turn 65, you will need to apply for Medicare benefits three months before you turn 65. If you dont sign up for Medicare Part B when youre first eligible, you may have to pay a late enrollment penalty for as long as you have Medicare coverage.
Three Things To Keep In Mind
For most people, Social Security benefits will represent a portion of their income during retirement yearsnot their sole source of income. It’s important to be aware of three important factors that will affect the amount of Social Security benefits you will eventually receive:
- When you choose to begin taking benefits
- Whether or not your benefits are taxed
- Whether or not you continue working
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How Does Income Affect Social Security Payments
If you begin Social Security when you are
| In the years before you reach full retirement age | In the year you turn full retirement age | Older than full retirement age |
|---|---|---|
| $1 is deducted from your benefits for every $2 you earn above the annual earnings1 limit | $1 is deducted from your benefits for every $3 you earn over the limit | No limit on earnings1 |
| Annual earnings limit: $51,960 in 2022 |
If you retire during a year in which you have already earned more than the yearly earnings limit, you may receive a full Social Security check for any whole month you are considered retired , regardless of earnings prior to retirement.
Determining Which Retirement Age Is Best For You
Should you take the money and run at age 62? Or hold out until you’re 70? Approximately 50% of people don’t wait past age 62, usually because they need the money, are convinced that Social Security might collapse at a later date, or are fearful of a short life span.
But is early retirement a good option for you? The questions below will help you decide.
Are you still working? Some people, especially construction workers and other physical laborers, are less physically able to handle work at 62, even though they don’t qualify for disability. They may be good candidates for early retirement. However, if you’re still able-bodied and interested in working, you might want to avoid claiming early retirement benefits. If you’re earning a high salary, you’ll miss the opportunity to boost your Social Security payment amount.
Second, you’ll lose one dollar in benefits for every two dollars you earn over the SSA’s earnings limit . There are no such deductions if you work after reaching full retirement age. The SSA provides an online earnings test calculator to determine whether working will lower your retirement benefits.
How’s your health? If you’re convincedâeither by genetics, research, or the amount of time you spend in doctors’ officesâthat you’ll have a shorter lifespan than your peers, it doesn’t make much sense to delay your retirement benefits.
You could be eligible for up to $3,148 per month in SSDI benefits
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How Much Can I Earn If I Work After My Full Retirement Age
If you continue to work after reaching full retirement age, you may work and earn as much as you’d like. You will not be subject to the retirement earnings test, and your Social Security benefits will not be affected.
If you work prior to FRA, you may forfeit part of your benefits if you earn above annual thresholds. However, your benefit amount will be recalculated at full retirement age to account for most of those forfeited funds.
Full Retirement Age For Getting Social Security
Full retirement age is the age at which you can claim your standard Social Security benefit, or your primary insurance amount , from Social Security. Your PIA is the standard amount you can expect to receive based on your inflation-adjusted average wages earned throughout your career. Full retirement age is 66 for those born in 1954 and 67 for those born in 1960 or later — it varies depending on your birth year.
It is important to know your full retirement age, as it affects when you can claim Social Security without reducing your benefits, the amount of delayed retirement credits you can earn in order to raise your benefits, and how much you can earn from working while receiving Social Security without forfeiting any of your benefits.
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