When To Take Social Security Benefits
You can elect to receive Social Security benefits starting at age 62 or as late as age 70, though your full retirement age depends on the year when you were born. For example, your FRA is 67 if you were born in 1960 or later. If you elect to take your benefit before it, then your Social Security income will be reduced by as much as 30%. Although the total number of payments received will be higher than if you had waited until your FRA, your total lifetime payment could be lower.
When you reach your FRA, you receive a full benefit based on the amount of Social Security tax paid into the system through your lifetime, up to a maximum monthly benefit amount. Although fewer total checks are received, your total lifetime payout may be higher.
Those who are able to defer taking Social Security income until after their FRA are given a delayed retirement credit each year past that age until age 70, equivalent to an annual 8% increase for people born in 1943 or later. Waiting until age 70 results in the fewest number of checks received, but delivers a much higher monthly benefit.
To determine the most appropriate age for you to start taking benefits, you need to calculate your Social Security breakeven age.
When you elect to take benefits early, you make a permanent choicemeaning that your benefits are reduced over the course of your lifetime, not just until your FRA.
Claiming Social Security Benefits At The Right Time Means More Money In Your Pocket Here’s A Guide To Everything From Knowing Your Full Retirement Age To Taking Social Security Spousal Benefits
For many Americans, Social Security benefits are the bedrock of retirement income so maximizing this stream of income is critical.
The rules for claiming Social Security benefits can be complex, but this guide will help you successfully navigate the details. Educating yourself can ensure that you claim the maximum amount to which you are entitled.
Here are 12 essential details you need to know.
If You Have Lived In Canada Less Than 40 Years
Not everyone receives the full Old Age Security pension. The amount you receive depends on the number of years you have lived in Canada.
If you lived in Canada for less than 40 years you will receive a partial payment amount. Your payment amount is based on the number of years in Canada divided by 40.
You can delay your first payment up to 5 years to get a higher amount.
If you lived in Canada for 20 years
If you lived in Canada for 20 years after age 18, you would receive a payment equal to 20 divided by 40, or 50%, of the full Old Age Security pension.
Is There A Maximum Benefit
Yes, there is a limit to how much you can receive in Social Security benefits. The maximum Social Security benefit changes each year. For 2021, itâs $3,895/month for those who retire at age 70 . Multiply that by 12 to get $46,740 in maximum annual benefits. If that’s less than your anticipated annual expenses, youâll need to have additional income from your own savings to supplement it.
Social Security Calculation Step : Adjust For Filing Age
The easy way to look at it is to think about it in annual numbers.
Your benefit will be lower if you file at 62 and higher if you file at 70.
If you file after your full retirement age, your benefit will increase by 8% per year. If you file in the 3 year window immediately prior to your full retirement age your benefit will decrease by 6.66% per year of early filing. For anything more than 3 years before your full retirement age, your benefit will decrease by an additional 5%.
A lot of people dont want to retire on their birthday so its important to break this down by a monthly amount.
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Getting A Social Security Number For A New Baby
The easiest way to get a Social Security number for your child is at the hospital after they are born when you apply for your childs birth certificate. If you wait to apply for a number at a Social Security office, there may be delays while SSA verifies your childs birth certificate.
Your child will need their own Social Security number so you can:
- Claim your child as a dependent on your income tax return
- Open a bank account in their name
- Get medical coverage for them
- Apply for government services for them
Keep your Social Security card in a safe place to protect yourself from identity theft.
Paper Social Security Statements
In the past, you used to get a Social Security statement every five years, starting at age 25 until age 60. That is, as long as you weren’t receiving Social Security benefits and you didn’t have a registered my Social Security account online.
But on January 9th, 2017, the Social Security Administration changed who will get paper Social Security statements. From now on, only people age 60 or older will receive paper statements. And that’s still only if you aren’t receiving Social Security benefits and don’t have a registered my Social Security account.
Essentially, you won’t get a paper statement now until you’re 60. You’ll have no clue what your future estimated Social Security benefits will be, and you won’t be able to plan for your future retirement without that information. Thankfully, theres another way to access your estimated Social Security benefits and related information.
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How Are Social Security Spousal Benefits Calculated
To understand Social Security benefit calculations, you first need to understand one piece of jargon: primary insurance amount . A persons primary insurance amount is the amount of their monthly retirement benefit, if they file for that benefit exactly at their full retirement age.
A Social Security spousal benefit is calculated as 50% of the other spouses PIA. Note that the age at which the other spouse files for Social Security benefits doesnt affect this calculation.
Example: Jane files for her retirement benefit at age 63 and is therefore receiving a retirement benefit that is smaller than her PIA. Janes husband Bob files for a benefit as Janes spouse. Bobs spousal benefit will initially be calculated as 50% of Janes PIA.
If Jane had filed for retirement benefits after her full retirement age , Bobs benefit as Janes spouse would still be calculated as 50% of Janes PIA. Again, the age at which Jane files for retirement benefits does not affect the amount that Bob can receive as Janes spouse.
Do You Have A Security Freeze Or Fraud Alert On Your Credit Report
If you have a security freeze, fraud alert, or both on your credit report, you can still open a mySocial Security account by temporarily lifting it.
If you dont want to temporarily lift your security freeze or fraud alert, you can visit your local Social Security office to open an account in person. For more information on security freezes and fraud alerts, read the Federal Trade Commissions .
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Why Your 59% Cola Might Not Go Far
The Social Security COLA is tied to inflation.
The annual increase is meant to offset the rising cost of everyday essentials like food, housing and gas.
Yet Social Security COLAs have historically lagged behind inflation including this year.
The Consumer Price Index, a government measure for the change in prices over time, hit 6.2% in October so the 5.9% COLA already falls short.
Higher Medicare costs in 2022 will likely erode the new Social Security adjustment even further.
Most Medicare beneficiaries have their monthly Part B premium automatically deducted from their Social Security checks.
On Nov. 12, the Centers for Medicare & Medicaid Services announced that Part B premiums are increasing by $21.60 a month in 2022 the biggest one-year increase in Medicare history.
Medicare beneficiaries are also facing higher Part A and Part B deductibles next year.
Rachel Christian is a Certified Educator in Personal Finance and a senior writer for The Penny Hoarder.
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Using Your Benefit Estimates
As your statement will show, your Social Security retirement benefits will vary depending on when you claim them before or after your full retirement age . The longer you wait to start receiving payments, the higher your benefit amount will be.
However, it’s not always better to wait until your full retirement age to claim your Social Security benefits. If you need your Social Security benefits for living expenses, or you have a health condition that makes it unlikely that you will live past age 75 or so, you may be better off collecting your benefits sooner rather than later. You can use a calculator at the Social Security website to see which retirement age makes the most financial sense for you .
For comprehensive practical information about how and when to claim Social Security benefits, see Social Security, Medicare & Government Pensions, by Joseph Matthews with Dorothy Matthews Berman .
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Theres A Social Security Spousal Benefit
Marriage brings couples an advantage when it comes to Social Security. One spouse can take what’s called a spousal benefit, worth up to 50% of the other spouse’s Social Security benefit. For example, if your monthly Social Security benefit is worth $2,000 but your spouse’s 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 Your Primary Insurance Amount Is Calculated
Once you have your AIME, you can calculate your primary insurance amount , the base rate for your Social Security payments. The PIA calculation relies on so-called bend points that determine how much of your income will be replaced by Social Security benefits in retirement.
Think of bend points as similar to tax brackets, in that they determine a percentage of your benefits based on incremental buckets of earnings. There are three bend point buckets: one for 90% of income replacement, one for 32% and one for 15%.
These bend point buckets help give lower lifetime earners a higher percentage of income replacement, and higher lifetime earners a lower rate of income replacement, says Jim Blankenship, certified financial planner and author of A Social Security Owners Manual.
The dollar amounts of bend points are adjusted for inflation each year, but the percentages of each bend point are set by law and remain unchanged. AIME amounts are always rounded down to the nearest $0.10. For 2021, the bend points are:
90% of the first $996 of your AIME, plus
32% of your AIME between $996 and $6,002, plus
15% of your AIME over $6,002
For a worker with an AIME of $6,250, the calculation would look like this:
90% of $966 = $896.40, plus
32% of $5,006 = $1,601.92, rounded down to $1,601.90, plus
15% of $248 = $37.20
This worker would earn a monthly Social Security benefit of $2,535.50 .
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When To Apply For Benefits How Much Youll Get
AARP, Updated April 19, 2021
All the information presented is for educational and resource purposes only. It is not intended to provide specific or investment advice. We don’t guarantee the accuracy of the tool and suggest that you consult with your advisor regarding your individual situation.
There Are Social Security Survivor Benefits For Spouses And Children
If your spouse dies before you, you can take a Social Security survivor benefit. However, that won’t be in addition to your own benefit. You must choose one or the other. If you are at full retirement age, that benefit is worth 100% of what your spouse was receiving at the time of his or her death .
A widow or widower can start taking a survivor benefit at age 60. However, the payment will be reduced because it’s taken before full retirement age. If you remarry before age 60, you are not eligible for a survivor benefit. If you remarry after age 60, you may be eligible for a survivor benefit based on your former spouse’s earnings.
Eligible children who are under age 18 or were disabled before age 22 can also receive a Social Security survivor benefit. It would be worth up to 75% of the deceased’s benefit.
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If Your Spouse Is Eligible For Ssdi You Can Apply For Those Payments Even If Youre Divorced Or Widowed
Spousal and dependent SSDI benefits arent exactly disability secrets, but they arent well-publicized, either. So how, exactly, do dependent disability benefits work? Lets start with still-married couples. Imagine your husband gets monthly SSDI, but prefers that you receive them instead. If your spouse has a progressive disability that causes gradual cognitive decline , this makes perfect sense. Can you apply to receive his monthly disability check from the SSA? Yes, provided that your spouse is at least 62 or you care for that spouses child under age 16.
Heres an example for divorced couples: Lets say your ex-spouse qualified for SSDI, but then you split up. As long as your marriage lasted 10 years or longer, you can still apply for your former spouses benefits. The same rule applies for divorced co-parents whose children are age 16 or younger.
Now lets talk about survivor benefits, which can transfer to a beneficiarys dependents after they pass away. If your spouse dies while getting SSDI, any of the deceaseds dependents may qualify for those benefits going forward. The SSA typically reduces survivor benefits using a calculation based on the widowed spouses and any dependent childrens ages. If you already reached full retirement age, you can likely receive your deceased spouses full payment amount. To see how much you may qualify for, scroll down to page 6 in the SSAs Survivor Benefits brochure.
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Children Can Also Collect Social Security Benefits
Minor children of Social Security beneficiaries can be eligible for benefits. Children up to age 18 and disabled children older than 18 may be able to receive up to half of a parent’s Social Security benefit. The disability must have occurred before the age of 22. The adult child can continue collecting the benefit even after the parent has died, as long as the disability prevents them from working.
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How Is Your Benefit Calculated
Social Security actually calculates your benefit based on the monthly average of your 35 highest earning years, not your last five years nor your highest three years, said Czarnowski. And if you dont have 35 earning years, zeros get plugged into the calculation, and that lowers your monthly average and, in effect, lowers your benefit.
You Can Still Get A Paper Social Security Statement
If you hate the idea of accessing your Social Security information online, theres still a way to get a paper statement. All you have to do is fill out Form SSA-7004 Request for Social Security Statement. After the Social Security Administration receives the form, you should expect to get a Social Security statement in four to six weeks.
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How To Check Your Earnings Record
How might check your earnings record? In the past, Social Security mailed you a statement that contained your earnings record and benefit estimate. Today, however, you need to create a my Social Security account to review your earnings record. You can do that at .
When checking whether your earnings record is correct or not, keep the following in mind. One, theres no statute of limitations on correcting errors related to wages, according to Kurt Czarnowski, a principal at Czarnowski Consulting.
A person needs to provide proof of what the correct amount of earnings was, Czarnowski said at a recent National Association of Personal Financial Advisors conference. But even if it’s something back in 1976, if happen to have W-2, can make that correction.
Thats not true, however, when it comes to correcting self-employment income errors on your Social Security statement. You have only three years, three months and 15 days to correct those errors, Czarnowski explained.
How To Receive Federal Benefits
To begin receiving your federal benefits, like Social Security or veterans benefits, you must sign up for electronic payments with direct deposit.
If You Have a Bank or Credit Union Account:
If You Dont have a Bank or Credit Union Account:
- Direct Express debit card a pre-paid debit card. Get help by calling the Go Direct Helpline at .
Make Changes to an Existing Direct Deposit Account:
Learn how to make changes to an existing direct deposit account. You also may contact the federal agency that pays your benefit for help with your enrollment.
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