Monday, May 16, 2022

Can I Retire At 58 And Collect Social Security

Don't Miss

Does Private Pension Affect Social Security Benefits

I’m 62 With $900K Can I Retire Now, When Should I Take Social Security and What About Taxes

En español | In the vast majority of cases, no. If the pension is from an employer that withheld Social Security taxes from your paychecks, it wont affect your Social Security benefits. Social Security uses a modified formula to calculate the full-retirement-age benefit amount for people covered by the WEP.

Can You Collect 1/2 Of Spouses Social Security And Then Your Full Amount

You can receive up to 50% of your spouses Social Security benefit. You can apply for benefits if you have been married for at least one year. If you have been divorced for at least two years, you can apply if the marriage lasted 10 or more years. Starting benefits early may lead to a reduction in payments.

Benefit Reduction For Early Retirement

We sometimes call a retired worker the primary beneficiary, because it is upon his/her primary insurance amount that all dependent and survivor benefits are based. If the primary begins to receive benefits at his/her normal retirement age, the primary will receive 100 percent of the primary insurance amount. If the spouse of a primary begins to receive benefits at his/her normal retirement age, the spouse will receive 50 percent of the primary’s primary insurance amount.

The table below illustrates the effect of early retirement, for both a retired worker and his/her spouse. For our illustration, we have used a $1,000 primary insurance amount. With this primary insurance amount and both primary and spouse retiring at their respective normal retirement ages, the primary would receive $1,000 per month and his/her spouse would receive $500 per month. The table shows that retirement at age 62 results in substantial reductions in monthly benefits. Please note that relatively few people can begin receiving a benefit at exact age 62 because a person must be 62 throughout the first month of retirement. Thus most early retirees begin at age 62 and 1 month.

Primary and spousal benefits at age 62

Year of

Don’t Miss: Social Security Benefits At Different Ages

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.

Brief History Of Social Security

Should I retire now at age 62 and collect Social Security ...

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 2035, 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.

You might also like

Also Check: Can I Locate Someone By Their Social Security Number

When Should I Expect My First Fers Annuity Payment

OPM will try to make a payment within 10 days of receiving your pension package. The ideal schedule would be to get you your first installment within three to four weeks of retirement, in an amount of about 80 percent of a rough estimate of your current entitlement.

How is FERS annuity paid out?

FERS annuities are based on high-3 average pay, which is the highest average base salary you have earned during all three consecutive years of work. Generally, a federal employees high-3 pay is the amount they have earned in their last three years of employment.

How long does it take to get your first FERS retirement check?

How long before I receive my first pension check? In my experience, most federal employees do not receive their first retirement check until 3 months after they retire.

How Your Social Security Benefits Are Earned

To be eligible for Social Security benefits in retirement, you must earn at least 40 “credits” throughout your career. You can earn as many as four credits a year, so it takes 10 years of work to qualify for Social Security.

In 2021, you must earn $1,470 to get one Social Security work credit and $5,880 to get the maximum four credits for the year.

Also Check: Getting New Ss Card After Marriage

When Can I Get Social Security

The earliest you can start receiving Social Security benefits is age 62. But the earlier you elect to receive your benefits, the smaller your monthly checks will be. To receive full benefits, you will have to avoid collecting Social Security until you reach your full retirement age. For people born in 1960 or later, that age is 67.

If you decide to retire early, you have the option of delaying your Social Security benefits. This strategy may work particularly well for married couples.

There’s Another Way Your Benefits Could Shrink If You File Asap

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

In the above example, filing before age 70 can shrink monthly benefit checks compared to the maximum you could receive. But it won’t necessarily reduce lifetime benefits, because total benefits will depend on how long you live.

However, your benefits could also shrink for another reason if you file earlier than you could. And this time the reduction in benefits could be a permanent one that affects the total income received from the SSA.

In this case, your benefits could be smaller if you file earlier in life and your decision to claim benefits at a young age results in your primary insurance amount being lower than it would be if you waited.

Remember, your PIA is based on an average of your highest 35 years of earnings, after adjusting wages for inflation. If you file early in life, you may not get a full 35 years of work in. If you don’t, some years when you earned nothing are counted, and you have some $0s factored in. Adding in $0s drags your entire average down, lowering your primary insurance amount.

If you opt to forgo the opportunity to boost average wages used to determine benefits, the resulting reduction in your PIA makes your lifetime Social Security income lower — not just your monthly benefit.

You do eventually get back the money withheld because you earned too much money — provided you live long enough. But there’s little point in claiming benefits ASAP if you won’t actually receive them because you’re earning too much income.

Read Also: How To Find Person With Social Security Number

How Much Will I Get A Month If I Retire At 62

If a person of full retirement age received $ 1,000 in benefits per month, a person who retired at age 62 will only receive $ 708 per month in comparison. While those who wait until turn 70 would get $ 1,253 per month.

How much Social Security will I get a 62?

If you start receiving benefits at age *And you are the: Wage Earner, the amount of benefit you will receive is reduced toAnd you are: Spouse, the amount of benefit you will receive is reduced to

How much less do you get if you retire at 62?

A worker can choose to retire as early as the age of 62, but doing so can result in a reduction of up to 30%. Starting receipt of benefits after normal retirement age may result in higher benefits.

Calculating How The Wep Will Affect You

I know this is a lot to follow, so if you want to take a shortcut in figuring out how the impact of the WEP, you may want to use my free calculator.

This calculator will tell you:

  • The amount of monthly Social Security benefit you can expect after the WEP reduction .
  • The number of substantial earnings years you already have
  • How additional years of substantial earnings will affect the WEP penalty

To use this calculator youll need to get a copy of your earnings history from the SSA. You should only put in your years of earnings that were covered by Social Security.

Read Also: How Do You Make An Appointment For Social Security

What Should I Do 1 Year Before Retirement

Finally, to prepare yourself emotionally, figure out what you plan to do with your retirement.

  • Create or update your retirement budget.
  • Adjust your portfolio for income.
  • Find out how Medicare works.
  • Refinance your mortgage
  • Determine how you are going to spend your time.

Is it better to retire at the beginning or at the end of the year? By retiring at the start of a year, you will receive your vacation pay in a potentially lower income year, thereby minimizing the taxation of the benefit. If you retire very close to the last day of the year , you will not receive your vacation pay until the following year.

Social Security And Disability Eligibility

Can I Collect Social Security Retirement and Disability ...

Also known as Supplemental Security Income , you can receive Social Security retirement benefits as long as youre at least 62 years old and have at least 40 work credits. Work credits are earned when you pay Social Security taxes on income you earned from a job or from self-employment. Youll be eligible to earn these benefits at the early retirement age or the full retirement age. The full retirement age varies depending on when you were born. For instance, the full retirement age is 66 if you were born from 1943 to 1954, according to the Social Security Administration . Full retirement age is 67 for anyone born after 1960, but you can opt for early retirement benefits at age 62.

For disability, the age requirements are quite different. You only need to be at least 18 years of age to qualify, and SSA guidelines require you to prove that:

  • You cant do the work that youve done before
  • You cant adjust to other work because of your medical condition
  • Your disability has lasted or will last for at least one year or result in death

For example, if you are working in 2020 and making more than $1,260 a month, you wont be considered disabled.

You May Like: How Can I Check My Social Security Status

Do You Have To Pay Taxes On Social Security After Age 70

Heres why: Every dollar you earn above the 85% threshold amount will result in 85 cents of your tax benefits, plus youll have to pay tax on the extra income. After the age of 70, there is no further increase, so you should claim your profits then even if they will be partially subject to income tax.

How much can a 70 year old earn before paying tax?

The tax-free thresholds for older people and for younger people have diverged over the last 20 years. Seniors dont pay tax until they earn $ 32,279 a year, while younger households have an effective tax-free threshold of $ 20,542.

At what age is Social Security not taxable?

At 65 to 67, depending on the year of your birth, you are at full retirement age and can receive full retirement benefits from Social Security tax-free.

Understanding The Windfall Elimination Provision

The Windfall Elimination Provision is simply a recalculation of your Social Security benefit if you also have a pension from non-covered work where no Social Security taxes were paid. The normal Social Security calculation formula is substituted with a new calculation that results in a lower benefit amount.

It would be easy to write a multipage essay on the WEP, but the necessary components can be distilled to a few simple points:

  • The maximum Social Security reduction will never be greater than one half of your pension amount. This is capped at a monthly reduction of $498 maximum WEP reduction .
  • If you have more than 20 years of substantial covered earnings , the impact of the WEP begins to diminish. At 30 years of substantial covered earnings, the WEP does not apply.

Image Source: Devin Carroll, Data: Social Security Administration

This phase-out of the WEP reduction offers a great planning opportunity if you have worked at a job where you paid Social Security tax. For example, if you worked as an engineer for 20 years before you began teaching, you may be able to do enough part time work between now and when you retire to completely eliminate the monthly WEP reduction.

Would it be worth it? If you consider how much more in benefits you could receive over your retirement lifetime, it could be worth $100,000 in extra income over a 20-year retirement.

Recommended Reading: What Will Social Security Pay

Figuring Out If 55 Is Too Early To Retire Requires Financial Planning

At any age, you’ll want to make sure you’ve fully thought through your retirement plan before retiring. Retiring early requires even more planning as the traditional sources of retirement income aren’t available and new challenges, like health insurance, arise. Here are some financial planning tips for executives looking to retire at 55.

Do You Have To File Taxes On Social Security And Pension

Why retire and collect social security at 62?

Payments of pensions, annuities, and interest or dividends from your savings and investments are not social security gains. You may have to pay income tax, but you dont pay social security taxes.

Do you have to submit retirement income taxes? The taxable portion of your pension or annuity is generally subject to federal income withholding tax. You may be able to choose not to withhold income tax from your retirement or annuity payments , or you may want to specify the amount of tax withheld.

Also Check: Mass Gov Massmedboard Renewals

Full Retirement Age: Age 6567 Depending On Date Of Birth

Your full retirement age is determined by your day and year of birth, and it is the age in which you get your full amount of Social Security benefits. For every year you delay taking your benefits from full retirement age up until you turn 70, your benefit amount will increase by almost 8% a year. It is referred to as a delayed retirement credit. This increase can result in more lifetime income for you and your spouse. Even after factoring in a potential return on investment and the monthly benefits you could have received if you claimed early, there can still be a $50,000$100,000 increase in lifetime benefits by waiting until you are older.

If You Were Born In 1958 Your Full Retirement Age Is 66 And 8 Months

You can start your Social Security retirement benefits as early as age 62, but the benefit amount you receive will be less than your full retirement benefit amount.

The chart below provides examples of the percentage of your full retirement benefit amount you and your spouse would receive from age 62 up to your full retirement age.

Read Also: Claim Social Security Benefits

Watch Out For Hidden Costs

Youll also want to consider other lifestyle factors, especially Medicare. Americans become eligible for federal health insurance coverage at age 65, well after when you can begin to file for Social Security.

If you stop working at age 62 and lose health insurance, you have to get supplemental insurance to bridge the gap until you turn 65 and Medicare kicks in, Neiser says.

If you work during retirement, you have another incentive to delay collecting Social Security. Earning too much at a job after you begin collecting your benefit can reduce your payout, but only if you have yet to hit full retirement age.

However, when you hit full retirement age, your benefit will increase to account for any benefit that was withheld earlier due to working. Heres how much you can earn and not get hit.

If youre younger than full retirement age for all of 2021, the Social Security Administration will deduct $1 of your monthly check for every $2 you earn above $18,960 per year.

If you reach full retirement age in 2021, the administration deducts $1 of your monthly check for every $3 you earn above $50,520 until the month you reach retirement age.

Youll also owe Social Security and Medicare tax on your earnings, even if youre already receiving benefits.

So those are some potential pitfalls to claiming Social Security early.

More articles

Popular Articles