Your Options: Working Applying For Retirement Benefits Or Both
Choosing when to start receiving your Social Security retirement benefits is an important decision. Theres no one choice that works for everyone because your lifestyle, finances, and goals are not the same as others.
Do you want to retire early, stay on the job, or work beyond retirement age?
Should you start receiving retirement benefits now, or wait until you can receive a higher benefit amount?
These are important questions youll need to answer as you plan for your retirement. Consider the four options below to help you make the best decision.
Is There A Maximum Income I Can Earn While Receiving My Oas Pension
Yes. If your annual income is higher than the income threshold for the previous tax year, you may be subject to the OAS Recovery Tax, and you may have to repay part of your OAS pension. The OAS Recovery Tax requires that OAS pensioners repay their OAS pension at a rate of 15 percent of their income above a certain threshold.
The Bottom Line On When To Start Social Security
Timing your Social Security benefits is a complex decision that will vary from person to person. Knowing the answers to the above questions will help you gauge when might be right for you, but consider speaking to a retirement professional, like a Certified Financial Planner , to map out when may be the right time to file for Social Security.
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What Is The Future Of Social Security
If youre skeptical about the future of Social Security or wary of potential changes such as means testingwhich could reduce or eliminate benefits for the wealthy, or an increase in the full retirement ageyou may be tempted to start benefits early, under the assumption that its better to have something than nothing. The 2020 annual report from the Social Security Trustees, released in April, projects that the Social Security Trust Fund has enough resources to cover all promised retirement benefits until 2035, and will cover 79% of scheduled benefits for new retirees thereafter without changing the current system. The 2020 report does not include an adjusted projection due to impacts, if any, from the pandemic.
Over the longer term, changes such as later benefit dates or means testing may be considered.
In any situation, if youre particularly concerned about the future prospects for Social Security, thats a good reason to save more, and earlier, for your retirement.
Working While Receiving Benefits
Maintaining a job while receiving benefits creates another set of restrictions on collecting social security. You can apply for social security, receive the benefits, and maintain your current job or part time position. Even though that supplies you with two resources for income there is a set of limitations. If you are under the full retirement age for the entire year you are working and receiving social security, then $1.00 will be deducted from your benefit payment for every $2.00 you earn above the annual limit of $16,920. If you will be reaching your full retirement age within the year you are working and receiving social security benefits, then $1.00 will be deducted for every $3.00 above the annual limit of $44,880. Once you reach your full retirement age your earnings through social security will not be reduced no matter how much you earn at a full or part time job. It is important to fully understand these limits especially if you are applying for social security while working under the full retirement age. Depending on your annual salary you can drastically alter the amount of your benefit.
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The Downside Of Claiming Early: Reduced Benefits
Consider the following hypothetical example. Colleen is 62 as of 2022. If Colleen waits until age 67 to collect, she will receive approximately $2,000 a month. However, if she begins taking benefits at age 62, she’ll receive only $1,400 a month. This “early retirement” penalty is permanent and results in her receiving up to 30% less year after year.
However, if Colleen waits until age 70, her monthly benefits will increase another 24% over what she would receive at her FRA, to a total of $2,480 per month.1 If she were to live to age 89, her lifetime benefits would be about $112,000 more, or at least 24% greater, because she waited until age 70 to collect Social Security benefits.2
Earn Ssa Work Credits In Some Countries
You may not have enough credits from your work in the United States to qualify for retirement benefits. But, you may be able to count your work credits from another country. The SSA has agreements with 24 countries. If you earned credits in one of those countries, they can help you qualify for U.S. benefits.
At What Age Can You Earn Unlimited Income On Social Security
Upon reaching full retirement age, you can earn an unlimited income while still receiving Social Security. Full retirement age varies based on the year in which you were born. That age can range anywhere from 65 to 67 based on your birth year. For those born after 1960, you will have to wait until you are 67 to be considered full retirement age. However, for those born before that, you might be able to retire as early as 65.
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, lets assume that you stop working at age 62. If your full retirement age is 66 and you elect to start benefits at age 62, the reduced benefit calculation is based on 48 months. This means that the reduction for the first 36 months is 20% and 5% for the remaining 12 months. Overall, your benefits would be permanently reduced by 25%.
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You Cant Work Anymore
Even the best retirement financial plans and projections can go awry. For example, you might have planned on working until you’re 70 so you could maximize your retirement benefits. If you get laid off at 62, however, and have difficulty finding another job, you might need to start taking your benefits just to get by.
Additionally, continuing to work in your industry simply might not be possible or healthy for you later in life. If your job requires manual labor, you might decide the risk of injury or other damage to your health isn’t worth continuing to work. In this case, the healthier lifestyle you’ll get by retiring early could outweigh the smaller monthly Social Security benefit.
Canadas Retirement Income System
Canada has a public pension system that provides seniors with a secure, modest base of retirement income.
The two main public pension programs are:
- the Old Age Security program
- the Canada Pension Plan
The OAS program and CPP, combined with retirement savings, investments and private pension plans, provide Canadians with one of the best retirement income systems in the world.
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Can I Still Work And Collect Social Security Benefits
You can collect Social Security benefits while working, starting at age 62. However, your age and earnings may impact the amount of benefits you receive during that time. Working won’t permanentaly reduce the Social Security benefits you receive, nor will your withheld benefits disappear.
Once you reach full retirement age:
- Your monthly benefit will increase, taking into account prior benefits detained due to earnings.
- Extra income no longer decreases your benefits.
If you work and collect Social Security when you are:
How Social Security Approval Works
When you retire, a lot of questions cross your mind. The one question that almost every retiree asks is: how long does it take to get my first social security check? It would be prudent to start by knowing how long does it take to apply for social security online. To your relief, the process will not take a lot of your time. Now that your application is done and submitted, you will be wondering how long does it take 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.
You will require 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 born out of the USA, you should provide proof of citizenship. A certificate of citizenship or passport will be adequate. Also, marital information and those of your children will be required.
Luckily, all these documents are not required at once when you apply. The SSA will send you notification when they are required.
Determining Your Best Benefit Options
Exemptions for Documentation
Not Planning As A Couple
It’s important to look at both spouses’ income and expected benefit when planning claims.
Maximize the higher earner’s benefit whenever possible, Shedden said. That could mean they hold off collecting until age 70, while the spouse who earned less can start collecting earlier, if necessary.
If you make significantly less than your spouse, there is a spousal benefit that allows one spouse to collect up to 50% of the other spouse’s earnings. So if you have a benefit of $500 a month, for example, and your husband or wife has $2,000, it pays to take the spousal benefit instead of your own.
You can’t start collecting the spousal benefit until the higher-earning spouse claims it, but you can start getting your own benefit and then you will get a bump up to the spousal amount once your partner claims. The benefit doesn’t increase if you want to take it beyond your full retirement age.
Can You Collect Social Security At 62 And Still Work
Yes, you can begin collecting Social Security as early as age 62, and you can still work while you collect these benefits. However, there is a limit to the amount that you can make while receiving benefits. Most people working full time will earn more than the limit of $18,960, and their benefits will be reduced by $1 for every $2 that they earn over the limit. If working part-time or full-time and earning less than this limit, then there will be no reduction in benefits.
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Eligibility Requirements For Divorced Spouses
Before you can receive benefits on your ex-husbands Social Security work record, you must meet all of the following spousal-benefit eligibility requirements: your ex is entitled to Social Security retirement benefits your marriage lasted at least 10 years you are unmarried youre at least 62 years old, and the benefit youre entitled to on your own work record is less than the benefit youd receive on your exs record. If your ex-husband hasnt applied for benefits yet, but qualifies for them and is age 62 or older, you can receive benefits on his record if youve been divorced from him for at least two years and meet all of the requirements listed above.
What Happens If I Work And Get Social Security Retirement Benefits
You can get Social Security retirement benefits and work at the same time. However, if you are younger than full retirement age and make more than the yearly earnings limit, we will reduce your benefit. Starting with the month you reach full retirement age, we will not reduce your benefits no matter how much you earn.
- We use the following earnings limits to reduce your benefits: 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 2021 that limit is $18,960.
- In the year you reach full retirement age, we deduct $1 in benefits for every $3 you earn above a different limit, but we only count earnings before the month you reach your full retirement age.
If you will reach full retirement age in 2021, the limit on your earnings for the months before full retirement age is $50,520.
Starting with the month you reach full retirement age, you can get your benefits with no limit on your earnings.
Use our Retirement Age Calculator to find your full retirement age based on your date of birth.
Use our Retirement Earnings Test Calculator to find out how much your benefits will be reduced.
What counts as earnings:
Your benefits may increase when you work:
When youre ready to apply for retirement benefits, use our online retirement application, the quickest, easiest, and most convenient way to apply.
If you need to report a change in your earnings after you begin receiving benefits:
Who Is Eligible To Collect Social Security Benefits
The specific eligibility requirements for Social Security benefits vary depending on the type of benefits, the age of the person filing the claim and, if you are claiming as a dependent or survivor, the age of the worker.
There is one general requirement, however, that applies to all Social Security programs except for SSI : The worker on whose earnings record the benefit is to be paid must have worked in “covered employment” for a sufficient number of years. This means that the worker must have earned enough of what Social Security calls “work credits” by the time he or she claims retirement benefits, becomes disabled, or dies .
For Social Security retirement benefits, you must be between the ages of 62 and 70 to start collecting benefits.
To check on your eligibility, see Nolo’s article Checking you Social Security Earnings and Benefits or call the Social Security Administration at 800-772-1213.
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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What A Social Security Break
In a nutshell, a Social Security break-even calculator can tell you when the best age is to start taking Social security benefits, in terms of how much money you could expect to receive over time. Going back to the previous example, lets assume that you track your benefit amounts over a 10-year, 20-year and 30-year period. Heres how your total benefits received would look over each of those periods, for all three starting points.
Your cumulative benefits after 10 years:
- $144,000, starting at age 62
- $122,400, starting at age 66
- $52,800, starting at age 70
Your cumulative benefits after 20 years:
- $288,000, starting at age 62
- $326,400, starting at age 66
- $316,800, starting at age 70
Your cumulative benefits after 30 years:
- $432,000, starting at age 62
- $530,400, starting at age 66
- $580,800, starting at age 70
You can see that youd draw the most Social Security benefits in total if you wait until age 70 to start taking them, assuming you live to age 100. But that could be a big if when youre not in the best health.
What you have to keep in mind when using a Social Security break-even calculator is that the numbers are hypothetical. They dont take into things that could affect your ability to draw benefits or how far those benefits might go, such as:
How Much Money Can I Make Before Social Security Will Reduce My Benefits
It depends on your age. If you have not yet reached full retirement age, then you can only earn $18,960. If you make more than that, then your benefits will be reduced. That limit increases to $50,520 the year in which you reach full retirement age. Suppose you reach normal retirement age in September. Then from January to September, the higher limit will apply. Upon actually reaching normal retirement age, the limit is removed altogether. This means that you can earn an unlimited income with no effect on your benefits. This age is anywhere from 65 to 67 depending on the year in which you were born.
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The History Of The Social Security Cola
Today, we have a fairly clear-cut process for determining how much the Social Security COLA will be every year. Its an automated process that requires no new laws, policy or other government legislation.
But the process wasnt always automated like it is now.
Prior to 1975, the Social Security cost-of-living adjustments were all set by Congressional action. Those were not that dependable, to say the least.
For the first decade of Social Securitys existence, there were no increases to benefits. Then in 1950, benefits increased by 77%. In 1952, they went up by an additional 12.5%. Two years later, in 1954, benefits increased by another 13%.
After that, the pace of adjustments and increases slowed down. The Social Security Administration only increased benefits eight times between 1954 and 1975.
This was when a new law took effect, which mandated that Social Security payments be be pegged to the annual changes in the consumer price index . This is a measurement of inflation tracked by the Bureau of Labor Statistics.