How Should I Decide When To Take Benefits
Consider the following factors as you decide when to take Social Security.
Your cash needs: If youre contemplating early retirement and you have sufficient resources , you can be flexible about when to take Social Security benefits.
If youll need your Social Security benefits to make ends meet, you may have fewer options. If possible, you may want to consider postponing retirement or work part-time until you reach your full retirement ageor even longer so that you can maximize your benefits.
Your life expectancy and break-even age: Taking Social Security early reduces your benefits, but youll also receive monthly checks for a longer period of time. On the other hand, taking Social Security later results in fewer checks during your lifetime, but the credit for waiting means each check will be larger.
At what age will you break even and begin to come out ahead if you delay Social Security? The break-even age depends on the amount of your benefits and the assumptions you use to account for taxes and the opportunity cost of waiting . The SSA has several handy calculators you can use to estimate your own benefits.
If you think youll beat the average life expectancy, then waiting for a larger monthly check might be a good deal. On the other hand, if youre in poor health or have reason to believe you wont beat the average life expectancy, you might decide to take what you can while you can.
A quick note about life expectancy
How To Decide When To Claim Social Security
Think less about when you should claim Social Security and more about what you can do. Once understand what can do, in a position to decide what you should do, said Czarnowski.
One thing thats critical to learn is your full retirement age or FRA. Thats the age at which you’re entitled to your full retirement benefit amount. And your year of birth determines your FRA.
You can find your FRA by birth year on the Social Security website. But you dont have to claim at FRA. In fact, you can start collecting benefits as early as age 62 or as late as age 70. If, however, you start receiving benefits early, your benefits are reduced permanently a small percent for each month before your FRA. And if you delay your benefits until after FRA, you will be eligible for delayed retirement credits that would increase your monthly benefit.
But no matter when you claim, make it an informed decision, Czarnowski said.
How Much Your Social Security Check May Increase In 2022 Explained
- 12:10 ET, Aug 23 2021
TENS of millions of Americans could be set for a monthly boost to their social security checks worth nearly $100 in 2022.
That comes because of an anticipated 6.2% cost-of-living adjustment for those receiving social security benefits, the latest estimates from The Senior Citizens League show.
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What Is My Approximate Estimated Social Security Benefit
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Work Longer And Claim Social Security Later
Working longer is often the first and most important step to maximize your Social Security income in retirement. Firstly, the later you claim Social Security, the larger your monthly payment will be. Secondly, working longer allows you to potentially replace years with lower incomes with your current higher income, thereby increasing your Social Security calculated benefits.
In case you were wondering, Social Security benefits are calculated based on your top 35 years of working and paying into Social Security. For those who havent worked for that amount of time, when reaching retirement age, you will see zero Social Security credit for years not worked, which can reduce your eventual retirement income from Social Security.
WASHINGTON, DC – OCTOBER 14: In this photo illustration, a Social Security card sits alongside … checks from the U.S. Treasury on October 14, 2021 in Washington, DC. The Social Security Administration announced recipients will receive an annual cost of living adjustment of 5.9%, the largest increase since 1982. The larger increase is aimed at helping to offset rising inflation.
3. Increase Your Income While Working
Earning more will increase the amount of Social Security you will receive in retirement. Simply put, the more money you make, the more you pay into the Social Security system the more you pay in, the more you should receive in benefits. Increased income will only help up to a certain point.
4. Delay Claiming Social Security Benefits
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Information For Government Employees
Some federal employees and employees of state or local government agencies may be eligible for a pension based on earnings not covered by Social Security.
If you didn’t pay Social Security taxes on your government earnings and you are eligible for Social Security benefits, the formula used to figure your benefit amount may be reduced.
If you are eligible for Social Security benefits on your own record and a pension not covered by Social Security, the Windfall Elimination provision, or WEP may affect your benefits.
- The “How It Works” section of the Windfall Elimination Provision fact sheet explains the formula Social Security may use to compute your benefit amount.
- How the Windfall Elimination Provision Can Affect Your Social Security Benefit provides a chart to show how your benefit amount changes based on your years of substantial earnings and the year you became eligible for benefits.
- Use the WEP Online Calculator to calculate your estimated retirement or disability benefits.
Some government pensions do not affect your benefit amount when you apply on your own record.
You can find a table that lists the amount of substantial earnings for each year at the bottom of the second page of our Windfall Elimination Provision fact sheet.
If you are eligible for Social Security benefits on your spouse’s record, and a pension not covered by Social Security, the Government Pension Offset, or GPO, may affect your benefits.
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.
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What Will My Social Security Benefits Be When I Retire And What About Those Of My Spouse
Your Social Security benefits can be estimated based on your average annual income, your current age and your age when you retire. Use our calculator to estimate your Social Security benefits during retirement.
For a more accurate and detailed estimate, visit the Social Security Administration website at www.ssa.gov where benefits can be determined based upon your exact earnings history and the exact date of your retirement.
Number Of Credits Needed For Disability Benefits
To be eligible for disability benefits, you must meet a recent work test and a duration work test.
The number of credits necessary to meet the recent work test depends on your age. The rules are as follows:
- Before age 24 – You may qualify if you have 6 credits earned in the 3-year period ending when your disability starts.
- Age 24 to 31 In general, you may qualify if you have credit for working half the time between age 21 and the time you become disabled. As a general example, if you become disabled at age 27, you would need 3 years of work out of the past 6 years .
- Age 31 or older – In general, you must have at least 20 credits in the 10-year period immediately before you become disabled.
The following table shows how many years of work credits you need to meet the duration of work test based on your age when your disability began. For the duration of work test, your work does not have to fall within a certain period. The table only provides an estimate of how many work credits you need. It does not cover all situations. If you are statutorily blind, you must only meet the duration of work test. When statutory blindness is involved, there is not a recent work test requirement.
NOTE: This table is an estimate only and does not cover all situations
|If you become disabled…|
Are Social Security Benefits Taxable
If you have a lot of income from other sources, up to 85% of your Social Security benefits will be considered taxable income. If the combination of your Social Security benefits and other income is below $25,000, your benefits wonât be taxed at all. The amount of your benefits that is subject to taxes is calculated on a sliding scale based on your income. Money that Social Security recipients pay in income taxes on their benefits goes back into funding Social Security and Medicare.
If your retirement income is high enough that your benefits are taxable, how do you pay those benefits? You can ask Social Security for an IRS Voluntary Withholding Request Form if youâd like the government to withhold taxes from your Social Security benefits. Otherwise, youâre expected to file quarterly tax returns to pay these taxes over the course of the year.
That covers federal income taxes. What about state income taxes? That depends. In 13 states, your Social Security benefits will be taxed as income, either in whole or in part the remaining states do not tax Social Security income.
How Your Ssdi Payments Are Calculated
The severity of your disability will not affect the amount of SSDI benefits you receive. The Social Security Administration will determine your payment based on your lifetime average earnings before you became disabled. Your benefit amount will be calculated using your covered earnings. These are your earnings at jobs where your employer took money out of your wages for Social Security or FICA.
Your SSDI monthly benefit will be based on your average covered earnings over a period of time, which is referred to as your average indexed monthly earnings . The SSA uses these amounts in a formula to determine your primary insurance amount . This is the basic amount used to establish your benefit.
SSDI payments range on average between $800 and $1,800 per month. The maximum benefit you could receive in 2020 is $3,011 per month. The SSA has an online benefits calculator that you can use to obtain an estimate of your monthly 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.
How Credits Are Earned
Since 1978, when you work and pay Social Security taxes, you earn up to a maximum of four credits per year.
The amount of earnings it takes to earn a credit may change each year. In 2021, you earn one Social Security or Medicare credit for every $1,470 in covered earnings each year. You must earn $5,880 to get the maximum four credits for the year.
During your lifetime, you might earn more credits than the minimum number you need to be eligible for benefits. These extra credits do not increase your benefit amount. The average of your earnings over your working years, not the total number of credits you earn, determines how much your monthly payment will be when you receive benefits.
Read our publication, “How You Earn Credits,” for more information.
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Estimate Your Social Security Benefit
Our Social Security benefits calculator can help you see how much you may receive both monthly and over your lifetime. Keep in mind that several factors can impact your estimated benefit amount:
- Your earnings
- Age you claim
- Your marital status
Compare estimated monthly and lifetime benefits at different claiming ages, and see how other factors may affect your benefits amount.
Whats Social Security For
As a general rule, Social Security replaces about 55% of a low earners pre-retirement salary, 41% of an average earners pre-retirement salary, and 34% of a high earners pre-retirement salary.
In no case, high, low, or average earner does it replace 100% of what someone is making, said Czarnowski. Rather, its meant to be a foundation to someones retirement income plan.
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Is My Social Security Income Taxable The Quick Answer
According to the IRS, the quick way to see if you will pay taxes on your Social Social Security income is to take one half of your Social Security benefits and add that amount to all your other income, including tax-exempt interest. This number is known as your combined income .
If your combined income is above a certain limit , you will need to pay at least some tax.
The limit is $25,000 if you are a single filer, head of household or qualifying widow or widower with a dependent child. The limit for joint filers is $32,000. If you are married filing separately, you will likely have to pay taxes on your Social Security income.
Explore How The Age You Start Collecting Social Security Affects Your Retirement Benefits
The calculator bases your benefit estimate on current formulas from the Social Security Administration. Your answers are anonymous. Because we do not access or use your Social Security earnings record, these are rough estimates.
Your estimated benefits:
Select claiming ages on the graph to see how your estimated benefit changes.
Claiming at age Age 67 is your full benefit claiming age.
Compared to claiming at your full benefit claiming age.
Social Security retirement benefits are not designed to be your sole source of retirement income, but waiting even one month will increase your benefits.
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Statement Of Contributions To The Qubec Pension Plan
Your contribution information will be on your CPP Statement of Contributions if:
- you have contributed to the CPP
- you have contributed to the Québec Pension Plan , and
- you live outside of Québec
You must contact Retraite Québec for a Statement of Participation in the QPP if:
- you have contributed to the QPP only
- you have contributed to the CPP and the QPP but currently live in the province of Québec, or
- you live outside of Canada and your last contribution was made to the QPP
You can write to them at the following address:
Check Your Benefit Estimate Too
Checking your estimated Social Security benefit on your statement is another useful exercise, according to Czarnowski.
At one time, Social Security only informed you what your estimated benefit would be at three different ages: 62, your full retirement age and 72. The new statement is much more useful. It provides estimates of your monthly benefit at each age, from 62 to 70, including your full retirement age.
People have a better sense of what they can get from Social Security at different ages, said Czarnowski.
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Also Check: How Much Do I Have To Pay Into Social Security
How Does The Calculator Estimate My Retirement Benefits Payment
Our simplified estimate is based on two main data points: your age and average earnings. Your retirement benefit is based on how much youve earned over your lifetime at jobs for which you paid Social Security taxes. Your monthly retirement benefit is based on your highest 35 years of salary history. You can get your earnings history from the Social Security Administration .
Your Social Security benefit also depends on how old you are when you take it. You can start collecting at age 62, the minimum retirement age, but youll get a bigger monthly payment if you wait until full retirement age, which is 66 but is gradually moving to 67 for people born in 1960 or after. If you can wait until 70 to start collecting, youll receive your maximum monthly benefit.
A single person born in 1960 who has averaged a $50,000 salary, for example, would get $1,332 a month by retiring at 62 the earliest to start collecting. The same person would get $1,911 by waiting until age 67, full retirement age. And he or she would get $2,370, the maximum benefit on those earnings, by waiting until age 70. Payments dont increase if you wait to collect past 70.
Other factors affecting the size of your benefit include whether youve worked for state or local government for more than 10 years your Social Security payment may be decreased if you paid into the civil service retirement program, for example.