Sunday, August 14, 2022

How Do I Collect Social Security Benefits

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What If I Change My Mind

How to Calculate Your Social Security Benefits

If you receive Social Security benefits at a reduced rate, but then change your mind, you have the option of withdrawing your application and paying back to the government what you’ve already received . Then, you could restart benefits at a later date to take advantage of a higher payout. But you are limited to one withdrawal per lifetime.

For example, let’s say you elected to receive early benefits at age 62, but then decided to go back to work at age 63. You could withdraw your Social Security application within the first 12 months of receiving benefits, pay back the years’ worth of benefits you received, go back to work, and then wait until a later age to restart your benefit checks at a higher level.

For important details about repaying benefits please read the SSA publication If You Change Your Mind.

How Can I Increase My Monthly Retirement Benefits

If you can wait until after your full retirement age to collect benefits, your benefit amount will increase each month until you turn 70. These monthly raises, called “delayed retirement credits,” can boost your benefits by as much as 124% of your PIA if you have an FRA of 67 and you wait until age 70 to collect. Maximizing your Social Security benefits can help close a gap between the money youve saved and the income you want in retirement.

Percent of PIA collectable by Age3

Collect at Age 67

100%

Collect at Age 70 or Later

124%

*Assumes FRA of 67

How Spousal Benefits Are Calculated

Spousal benefits are based on how much the other spouse would receive if that person began collecting benefits at the full or “normal” retirement age.

The Social Security Administration has an online calculator that can show you what percentage of your spouse’s benefits you will be eligible for depending on your own age when you start receiving benefits.

The short answer to the calculation is this: You’re eligible for half of your spouse’s benefit amount as long as you wait until your full retirement age to apply. The earlier you file, the less you’ll get.

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What If I Take Benefits Early

If you choose to receive your Social Security check up to 36 months before your full retirement age, be aware that your benefit is permanently reduced by five-ninths of 1% for each month.

If you start more than 36 months before your full retirement age, the benefit is further reduced by five-twelfths of 1% per month, for the rest of retirement.

For example, let’s assume that you stop working at age 62. If your full retirement age is 66 and 2 months you elect to start benefits at age 62, the reduced benefit calculation is based on 50 months. This means that the reduction for the first 36 months is 20% and 5.83% for the remaining 14 months. Overall, your benefits would be permanently reduced by 25.83%.

Adjust Your Pia For The Age You Will Begin Benefits

Study: Only 1 in 300 Seniors Know These 5 Social Security Rules ...

The final amount of Social Security retirement benefit that you receive is based on the age when you begin benefits.

The earliest you can begin retirement benefits is age 62 . You get more by waiting until a later ageas late as age 70to begin benefits.

Of course, another complex formula is used to determine how much more you will receive if you wait.

This formula uses your Primary Insurance Amount calculated in the previous step. This is the amount you will get if you start benefits at your full retirement age . Your FRA can vary, depending on the year you were born. For people born between 1943 and 1954, as in our example, the FRA is age 66.

For people born on Jan. 1, the FRA is based on the year prior. Someone born on Jan. 1, 1955, will have an FRA based on 1954.

A reduction is applied to your PIA if you begin benefits before your FRA. A credit, referred to as a “delayed retirement credit,” is applied if you begin to receive benefits after your FRA.

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Why Do People Collect Social Security Benefits Early

One of the primary reasons people choose to collect their benefits too soon is because they misunderstand how the program works, according to Shu.

The Social Security administration calculates benefits based on an individual’s 35 highest earning years. The program is funded by current workers through the payroll tax, which is 6.2% on up to $147,000 in earnings per employee.

“It’s almost as if they are thinking about it as a defined contribution plan or 401,” says Shu. “The stronger that people feel that sense of ownership, the more that they want to claim early.”

A person’s sense of ownership over their benefits and loss aversion the idea that people are more sensitive to losses than they are to gains of the same amount both play a role in their decision to collect early, according to Shu.

In other words, people feel Social Security benefits belong to them because they’ve spent their entire lives paying into the system, says Shu. Many believe that by not collecting early, they’ll lose out on benefits because they assume they’ll die earlier than they actually will.

Shu says impatience also plays a role in one’s decision to collect benefits too soon just as people tend to value the immediate satisfaction of not going to the gym today and postponing that visit until tomorrow, they don’t often think about the long-term implications of collecting early.

Beginning Benefits Before Fra

If you choose to begin to receive benefits before you reach your full retirement age, one or both of the following calculations will apply:

  • 5/9 of 1%: Your benefits are reduced by 5/9 of 1% per month, up to a maximum of 36 months, depending on how many months you have until you reach FRA.
  • 5/12 of 1%: If you are more than 36 months away from reaching FRA, the reduction above is applied, and then for the number of months greater than 36, the benefit is further reduced 5/12 of 1% per month.

Therefore, if your FRA is age 66, your benefits would be reduced by 25% if you begin taking them at age 62. Find that figure by taking 5/9 of 1%, or 0.56 multiply by 36 months to get 20%. Then, 5/12, or 0.42, multiplied by the remaining 12 months, is 5% for a total of 25%.

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Social Security Benefits If Youre Married

Determining Social Security calculations is a bit more complicated if you are married because you have the option to base benefits on your spouses salary history.

If the lesser earning spouses benefits are based on the higher earning spouses, then the limit of those earnings will be 50 percent of the higher earning spouses benefit amount.

To illustrate this, lets talk about A and B, a married couple.

  • A makes significantly more money than B.
  • A makes so much more money that As monthly Social Security benefits are going to be more than twice of Bs, based on Bs salary history.
  • The good news for B is that they can choose to have their Social Security benefits based on As salary history and can receive as much as 50 percent of As monthly benefit. This is the case even if B didnt hold a job outside the home.

On the other hand, if Bs monthly benefit would have been more than half of As, based on Bs salary history, then B can claim that amount.

In short, B can claim the higher of these two possibilities: Bs own Social Security earnings or half of As.

This all assumes that B doesnt begin claiming benefits until B reaches full retirement age. If B begins claiming earlier, then Bs benefits will be less. In addition, if B is claiming benefits based on As earnings, then B does not benefit by waiting later than full retirement age.

B will not be given more monthly benefits if B waits until age 70, for example, based on As earnings.

Your May Have To Pay Taxes On Social Security Benefits

How much your Social Security benefits will be if you make $30,000, $35,000 or $40,000

Most people know that you pay tax into the Social Security Trust Fund throughout your career, but some retirees don’t realize that you also have to pay tax on your Social Security benefits once you start taking them. Benefits lost their tax-free status in 1984, and the income thresholds for triggering tax on benefits haven’t been increased since then.

It doesn’t take a lot of income for your Social Security benefits to be taxed. For example, a married couple with a combined income of more than $32,000 may have to pay income tax on up to 50% of their Social Security benefits. Higher earners may have to pay income tax on up to 85% of their benefits.

You may also have to pay state income taxes on your Social Security benefits. See our list of the 12 States That Tax Social Security Benefits.

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How Social Security Approval Works

Approval Timeline

When you retire, a lot of questions cross your mind. The first question you should ask is when to claim social security benefits. See our article on When to Claim Social Security Benefits.

The next question after you decide to claim is: how long does it take to get my first social security check? It would be prudent to start by knowing how long it takes to apply for social security online. To your relief, the process will not take a lot of your time. Once your application is done and submitted, you will be wondering how long it takes to get social security approval.

Typically, it takes 6 weeks to process your application and for the benefits to start. However, it will take longer if you submit incorrect information. Also, the duration for approval will depend on the number of submissions the Social Security Administration will be processing at the time. Overall, the wait time is at least six weeks or longer depending on a number of factors.

Mandatory Information

You will need your social security number, birth certificate, and supporting financial documents when you apply. Tax return evidence and W-2 forms are also required for self-employed applicants.

For those not born in the USA, you should provide proof of citizenship. A certificate of citizenship or passport will be adequate. Also, marital information will be required.

Luckily, all these documents are not required at once when you apply. The SSA will send you notifications when they are required.

Effect Of Late Retirement On Benefits

1.Represents Full Retirement Age based on DOB Jan. 2, 1955

2.PIA = The primary insurance amount is the basis for benefits that are paid to an individual

To review your situation, your annual Social Security statement will list your projected benefits at age 62, full retirement age, and age 70, assuming you continue to work and earn about the same amount until age 62, full retirement age, or age 70 before retiring. If you need a copy of your annual statement, you can request one from the Social Security Administration .

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Social Security Isnt Just For Retirement

      First created in 1935 as part of then-President Franklin D. Roosevelts New Deal, the Social Security Administration originally called the Social Security Boardsprang out of a need to assist the millions of retired or elderly Americans who had lost everything in the Great Depression. After the program was launched, it was expanded to help children, widows, and disabled people who might otherwise become destitute.

      Today, the SSA, an independent agency of the federal government, still oversees those social insurance programs, each with specific requirements that must be met to be eligible to collect benefits.

      Social Security Schedule: When July 2022 Benefits Will Be Sent

      Can I Collect Social Security Spousal Benefits?

      The next round of Social Security checks are scheduled to go out in early July. In May, the Consumer Price Index for All Urban Consumers rose by 1.0% and the all items index increased 8.6% over the last 12 months. Rising inflation has pushed the Social Security cost-of-living increase to 5.9% for 2022, the largest in nearly 40 years. This increase went into effect on Jan. 1 for Social Security beneficiaries and Dec. 30 for Supplemental Security Income beneficiaries.

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      Here is the July Social Security schedule:

      • If your birth date is on the 1st-10th of the month, your payment is distributed on Wednesday, July 13.
      • If your birth date is on the 11th-20th, your payment is distributed on Wednesday, July 20.
      • If your birth date is on the 21st-31st, your payment is distributed on Wednesday, July 27.

      POLL: Are You Concerned That Social Security Benefits Will Be Reduced During Your Lifetime?

      You may also qualify for Supplemental Security Income if Social Security isnt enough to cover your basic living expenses. The SSI program sends monthly payments to adults and children with a disability who meet financial qualifications. SSI is also available to those 65 years and older who have limited income and financial resources.

      If you received Social Security before May 1997 or if youre receiving both Social Security and SSI then you will receive both your Social Security and SSI payment on July 1.

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      How Do Social Security Spousal Benefits Work

      You’re eligible for spousal benefits if you’re married, divorced, or widowed and your spouse is or was eligible for Social Security. Spouses and ex-spouses generally are eligible for up to half of the spouse’s entitlement. Widows and widowers can receive up to 100%.

      You can claim benefits based on your own work history or on that of your spouse. You’ll automatically get the larger amount.

      If you are no more than three months away from age 62, you can apply online or by phone. If you plan to put off applying to get the largest payment possible, wait until you’re no more than three months from full retirement age. That’s 66 or 67, depending on your year of birth.

      How Much Can I Expect To Get In Social Security Benefits

      The amount of benefits to which you are entitled under any Social Security program is not related to financial need , but is based on the income you have earned through years of working, through jobs and self-employment. Social Security keeps a record of these earnings over your working lifetime and pays benefits based on the average amount earned.

      Your Social Security retirement benefits will vary depending on whether 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. For information on estimating your benefits, see Nolo’s article Social Security: Checking Your Earnings and Benefits.

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      Don’t Forget About Foreign Taxes

      Even if you don’t have any earned income, you will be subject to the tax laws of the country you’re living in. That means you may have to file taxes there in addition to your U.S. return if you receive distributions from your 401, IRA, or pension.

      Some foreign governments tax U.S. Social Security benefits, so it’s a good idea to contact the countrys embassy or an international tax lawyer for tax advice. Deductions and credits can sometimes soften or eliminate the impact of foreign tax payments.

      What You Need To Know About Social Security

      How Social Security Works

      First off, let’s establish some basics about Social Security. The Social Security administration determines a worker’s benefit, known as the primary insurance amount , by using a calculation based on a worker’s 35 highest earning years, says Kiner.

      Workers are able to start collecting benefits at age 62 but their benefit will be reduced if they don’t wait until full retirement age. Full retirement age is between 66 and 67, depending on when you were born.

      If you wait until you’re at full retirement age to collect, you’re eligible to receive 100% of the benefits that you’re entitled to. For every year after full retirement age that you delay receiving benefits, your benefits will increase 8% each year.

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      What Income Reduces Social Security Benefits

      If you are younger than full retirement age and earn more than the yearly earnings limit, we may reduce your benefit amount. If you are under full retirement age for the entire year, we deduct $1 from your benefit payments for every $2 you earn above the annual limit. For 2022, that limit is $19,560.

      Retirement Age For Those Born After 1937

      Year Born 1960 or later 67 years

      The system does provide for early retirement at age 62, but also offers higher benefits for people who wait to make their claims after reaching full retirement age. For more information, see Nolo’s article Social Security Benefits: Retirement, Disability, Dependents, and Survivors.

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      How Does Social Security Work

      While employed, you pay a 6.2% Social Security tax on earnings up to a maximum amount , and your employer pays a matching 6.2%. If you are self-employed, then you are responsible for the entire 12.4% tax yourself.

      The money is not held in a personal account, such as a bank account. Rather, the money that you pay into Social Security today goes to provide monthly benefits for current retirees and other Social Security recipients.

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