Wednesday, August 10, 2022

Can I Retire At 40 And Collect Social Security

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Brief History Of Social Security

SSDI, SSI & Retirement | Social Security Disability Insurance & Supplemental Income | theSITREP

The Social Security program was created by the Social Security Act that President Franklin D. Roosevelt signed into law in 1935. The first checks went out in 1940. Originally it paid benefits only to workers 65 and older, but in the 1970s the government altered it to allow workers to claim benefits as early as 62. It also instituted annual cost-of-living adjustments to help Social Security keep pace with inflation.

The program has worked fairly well so far, but many people fear for the future, when there will be fewer workers to support a greater number of Social Security recipients. The latest Social Security Trustees’ Report indicates the program’s trust funds would be depleted by 2034, after which it would be able to pay out only about 76% of benefits to retirees and about 92% to disabled workers.

The government has proposed several possible solutions for ensuring the long-term sustainability of the program, but at present no plans have been set. There’s no risk of the program disappearing in the next decade or two, but it’s possible future benefits may not go as far as they do today. That’s why today’s workers need to prioritize their personal retirement savings, so they can cover most of their expenses on their own.

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Retire By 40 Heres How To Do It

    When it comes to retirement, its never too soon to start planning and saving. According to a 2017 the average retirement costs $738,400. Another study, the 2019 Retirement Confidence Survey from the Employee Benefit Research Institute, found that 1 in 3 Americans think theyll need at least $1 million to enjoy a comfortable retirement.

    If you plan to retire at what Social Security calls your “normal “retirement agetypically 65 or 67 for most people these daysyou could have several decades to save. If youve set a goal to retire by 40, on the other hand, you’re going to have to save far more aggressively. But that doesnt mean you cant do it. Here are some ideas.

    Your Retirement Age And When You Stop Working

    Your retirement age is the age you begin receiving Social Security retirement benefits. For many people, this is not the same age youll stop working.

    The age you stop working can affect the amount of your Social Security retirement benefits. We base your retirement benefit on your highest 35 years of earnings and the age you start receiving benefits.

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    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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    What You Need to Know About Social Security and Retirement Benefits

    Not at all, life is a dream in early retirement. Even if I stop working completely today, Id still receive $2,446 in Social Security retirement benefit when I turn 67. Thats not bad at all.

    Mrs. RB40 should also receive $1,718 in benefits at 67 if she stops working now. Thats $4,164 per month extra for our household. That should cover our core living expenses. If we keep lifestyle inflation down, were set. Mrs. RB40 isnt quite ready to retire yet so Ill update this once per year.

    Meanwhile, we will keep working to increase our passive income. Once our passive income surpasses our expense consistently, then well be set for life. Any Social Security Benefits will be gravy. My father-in-law uses his Social Security Benefits as a donation fund. Id love to do the same when were 67. I think thats a great idea.

    Have you checked your Social Security statement lately? Are you counting on it to fund your retirement?

    If you made it to the end, go check out this post Are you worth more than you earned? You already have the earning data so might as well figure out if youre worth more than you earned.

    *Sign up for a free account at Personal Capital to help manage your investment accounts and net worth. I log in almost every day to check on my accounts and cash flow. Its a great site for DIY investors. Take charge of your finance so you dont have to depend on Social Security in your old age!

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    Reasons You Should Claim Social Security Early

    Learn why Social Security at 62 might not be a bad idea. Social Security 101

    Your retirement planning likely includes getting income from the Social Security Administration, but when you start collecting Social Security benefits can have a big impact on your planning. The earliest you can collect is age 62, but youll get more money if you delay your benefits past your initial Social Security eligibility. If you wait until after your full retirement age to start collecting Social Security you can earn delayed retirement credits, which will increase your benefits even more.

    Read: When Social Security Runs Out: What the Program Will Look Like in 2035

    You might think that waiting for bigger benefits is better, but thats not always the case. There is no definitive answer to when you should collect Social Security benefits, and taking them as soon as you hit the early retirement age of 62 might be the best financial move.

    Working While Receiving Benefits

    You may work after you start receiving benefits, which could mean a higher benefit for you in the future. We may withhold some of your benefits if you earn more than the yearly earnings limit. Sometimes people who retire in mid-year already have earned more than the annual earnings limit. However:

    • We have a special rule that applies to earnings for one year, usually the first year you begin receiving benefits. This means we cannot withhold benefits for any month we consider you retired, regardless of your yearly earnings.
    • After you reach full retirement age, we will recalculate your benefit amount to take into account any months you did not receive benefits because your earnings were too high.

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    What Month Can You Start Collecting Social Security

    You can start collecting Social Security in the first full month in which you are 62. That means if your birthday is on the 15th, you won’t be able to start collecting benefits until the month after you turn 62. If you were born on the first or second day of the month, you can start collecting benefits that month.

    Special Rule As You Approach Full Retirement Age

    Why retire and collect social security at 62?

    If you are already receiving your retirement benefits, a special higher earnings limit applies in the calendar year you turn your full retirement age . If you will reach full retirement age in 2021, you can earn up to $4,210 per month without losing any of your benefits, up until the month you turn 66. But for every $3 you earn over that amount in any month, you will lose $1 in Social Security benefits. Beginning in the month you reach full retirement age, you become eligible to earn any amount without penalty.

    If you are self-employed, you may receive full benefits for any month during this first year in which you did not perform what Social Security considers “substantial services.” The usual test for whether you worked substantial services is whether you worked in your business more than 45 hours during the month . In other words, if you work in your business more than 45 hours in a month, Social Security may reduce your benefit.

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    The Mistake: Not Checking Your Earnings Record

    Even if you’re decades away from claiming Social Security, you could be making a big mistake if you don’t keep track of your yearly earnings. The amount of Social Security benefits you receive depends on your earnings record, so if that record is incorrect, you might not receive the benefits you’re entitled to.

    Errors can occur for a variety of reasons, including an employer reporting an incorrect amount of earnings or your earnings not showing up because you got married or divorced and your name change has not been processed correctly.

    Youll Get Less If You Claim Early And Earn Too Much Money

    Once you reach full retirement age, there is no income test for receiving full benefits. But if you claim early and continue to earn income, your Social Security check will shrink if you make too much money. For 2022, you can earn up to $19,560 without seeing your benefits reduced. After that, the SSA will withhold $1 for every $2 you earn above the threshold. If youll reach full retirement age later in the year, you can earn up to $51,960. After that, the SSA withholds $1 for every $3 earned.

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    Waiting As Long As Age 70 To Claim Benefits Can Significantly Boost Your Monthly Check

    One of the easiest ways to increase your Social Security check is to wait until age 70 to file for benefits. If your full retirement age is 67, which it is for all workers born after 1960, you’ll earn an additional 8% for each of those three years of waiting, up to a maximum of 24%. When compared with the benefits you would earn if you filed early, at age 62, you’ll see a significant bump of about 77%. You’ll want to discuss your filing strategy with a financial or tax advisor, as everyone has different needs and financial capabilities. However, if you can afford to wait to file, your monthly benefits will be permanently increased by a significant amount.

    Think Strategically About Pension And Social Security Benefits

    Understanding Social Security Retirement Age and Why It Matters ...

    For most retirees, Social Security and pensions are the two primary sources of regular income in retirement. You usually can collect these payments earlyat age 62 for Social Security and sometimes as early as age 55 with a pension. However, taking benefits early will mean that you get smaller monthly benefits for the rest of your life. That can matter to your bottom line, even if you expect Social Security to be merely the icing on your retirement cake.

    On the Social Security website, you can find a projection of what your benefits would be if you were pushed to claim them several years early. But if you’re part of a two-income couple, you may want to make an appointment at a Social Security office or with a financial professional to weigh the potential options.

    For example, when you die, your spouse is eligible to receive your monthly benefit if it’s higher than his or her own. But if you claim your benefits early, thus receiving a reduced amount, you’re likewise limiting your spouse’s potential survivor benefit.

    If you have a pension, your employer’s pension administrator can help estimate your monthly pension payments at various ages. Once you have these estimates, you’ll have a good idea of how much monthly income you can count on at any given point in time.

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    The Social Security Wage Base Rose To $147000

    Social Security is primarily funded through payroll taxes on current workers. On your paycheck, OASDI taxes take out 6.2% for Social Security and 1.45% for Medicare, for a total of 7.65%. Your employer pays an additional 7.65% on your behalf, or if you are self-employed, you are responsible for the full 15.3% yourself. But the 6.2% in Social Security taxes is limited by the so-called wage base, which rises every year in response to inflation. For 2022, only wages up to $147,000 are taxed for Social Security.

    How Does Early Retirement Affect Social Security

    Many adults look forward to retirement. And some wouldnt mind leaving the workforce ahead of schedule. But few people think about the drawbacks of retiring early. Few realize that an early retirement might affect their long-term financial plan and their access to certain benefits. A financial advisor can help you figure out all of your retirement and social security issues.

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    What Other Factors Should You Consider When Deciding To Collect Social Security

    Before you decide to collect Social Security based on your break even point, you should also consider how collecting early or delaying could impact the benefit your spouse receives.

    Since the Social Security formula benefit is based on an individual’s 35 highest earning years, women often collect less in benefits than men because of career breaks during motherhood and overall lower lifetime earnings. However, the Social Security spousal benefit erases some of the disparity in Social Security earnings between men and women.

    The spousal benefit is available to all spouses, regardless of whether the spouse has a work history or not . The spousal benefit is 50% of the higher earner’s benefit and in order for a spouse to receive the benefit, the higher-earner must be collecting their own benefit.

    The Social Security administration automatically determines whether an individual would earn more in Social Security benefits if they collected on their own work record versus their partner’s work record.

    For example, if the higher earner receives a $2,000 monthly benefit, the spouse is eligible to receive up to $1,000, depending on whether they choose to wait until full retirement age, says Kiner. For example, if someone collects the spousal benefit four years before full retirement age, their benefit will be 35% of the higher-earner’s benefits.

    Check In With Your Accountant Or Financial Advisor

    When Can I Retire and Collect Social Security? What’s The Best Age?

    I always think it’s best to run the numbers by your accountant or other financial advisor. It’s great to be able to continue to work for many reasons. In fact, the Bureau of Labor Statistics projects the biggest annual increase in the labor force through 2024 will be in the 65 to 75 age group. But make sure you know what continuing to work at this point in life means in terms of your overall financial situation.

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    Scenario : Full Retirement Now = $2447/month At 67

    If I stop working now and have no more earned income, my benefits would be $2,447 when Im 67. This is the green dot on the chart below. Im getting very close to the second bend point.

    This PIA is relatively low here because I have 8 years with no earnings. Remember, I only have 24 earning years up until today. The AIME calculation sums up your highest 35 earning years and averages them out. The 11 zero earning years drag down the average.

    • Mrs. RB40s will receive $1,774/month at 67 in this scenario . She is about halfway to the second bend point.

    S To Launch Your Job Search After Retirement

    Network onlineCreate a professional online presence. Update or launch work-specific accounts on LinkedIn, Facebook, Instagram and Twitter. Post and comment on elements of your profession or career. These can help showcase your career expertise. Use your social media connections to connect with potential employers and find job opportunities.

    Create an age-proof resumeHighlight your experience without referencing your age. Keep your resume short, including only relevant or recent jobs but highlighting your accomplishments under a Career Highlights section at the top. Get rid of graduation dates or any other references that may give away your age. Make sure your email address is updated and timely and list your cell phone number never your landline. Dont include a fax number. Include social media info particularly related to the professional profile youve created with career-related social media accounts.

    Online job search focused on older workersThere are online job search sites that specialize in connecting retirees and older workers with companies looking to hire, as well as sites that provide resources for older workers looking to get back into the workforce.

    Self-EmploymentRetirement is an ideal time to try your hand at self-employment especially if you have retirement savings to support yourself. If theres a hobby you want to turn into a business or a line of work you always wanted to try, this may be a route back to the workforce.

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    Question: Can You Collect Your Own Pension And Social Security Benefits

    Teachers in some states benefit from the states independent pension plan, while other states offer only coverage in partnership with Social Security. Teachers in the latter states have an easy answer to the question of double-dipping into pension and Social Security. Theyre simply the same thing, so double-dipping is not possible.

    Teachers who may find the rules more confusing are:

  • Those who teach in states with independent pension plans
  • Those whove worked in a capacity besides teaching and have paid into Social Security through that work
  • If you fall into either of these buckets, you may be eligible to receive benefits. However, you must first qualify. Qualifying is based on earning income credits. For every $1,300 you earn, you get one income credit. But you can only earn up to four credits per year. Forty total credits are required to qualify for Social Security benefits, which means youd need to earn four credits per year for 10 years to be eligible. There is no partial benefit, its all or nothing.

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