Tuesday, September 27, 2022

How Do I Start Social Security

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Do You Have An Immediate Use For The Money

How to decide when you should start collecting your Social Security

One of the most common reasons for taking Social Security early is simply because you need it. If your Social Security benefit is the only way you can keep the lights on, then its reasonable to file for it when you need it. However, its important to remember that working longer in your 60s to delay Social Security may be far easier than living on a reduced benefit in your 80s, especially if youre physically able to work now.

But what if you have no immediate use for the money but think you might be able to manage it better than Uncle Sam? Your Social Security benefit can feel like free money you can take now to grow into larger retirement income later. But Weston and Kate Horrell, an Accredited Financial Counselor and the founder of KateHorrell.com, dont see this as the optimal use of your Social Security benefit.

You may invest your Social Security income, but it does not count as earned income to be placed into an individual retirement account , Horrell points out. That means if Social Security is your only income, you may not be able to contribute to an IRA, and if it isnt, youll be limited to the lesser of $7,000, the IRA contribution limit for those over 50, or the amount you make outside of Social Security.

What Month Should I Choose As My Month To Start My Benefit

Hi Larry, I turn 66 in the end of September 2021, how far in advance do I need to apply for social security?If my full retirement age is 66 and 2 months what month to choose as my month to start my benefit?When I will receive my first payment? Thanks, Eva.

Hi Eva. If you’ll be claiming Social Security retirement benefits and if you want to start your benefits effective with the month you reach full retirement age you’d choose to start your benefits effective with November 2021. However, that may not be your best option. The best option for when to start drawing benefits depends on each person’s individual set of circumstances. Therefore, you may want to strongly consider using our software to fully analyze the options available to you in order to determine your best strategy for maximizing your benefits.

If you do decide to claim your benefits effective with November 2021 you could file your application up to 4 months prior to that, or as early as July 1 2021. You wouldn’t really need to file in advance, though. You could actually apply as late as May 2022 and still be able to claim benefits retroactive to November 2021.

Best, Jerry

How Can Thieves Profit From Stealing My Social Security Card

Fraud artists can manipulate a stolen or lost Social Security card in a lot of waysall of which can lead to you taking a major financial hit. Here are three ways they do it.

  • Opening new payment cards Fraudsters often buy the victims Social Security number from other data thieves who stole the information. They use the data to open new payment card accounts using the victims name.
  • Breaking into financial accounts via mobile phone theft Identity thieves use Social Security numbers to commit digital fraud with stolen or hijacked mobile phones. The victims stolen or lost Social Security number allows them to break into mobile phone accounts and steal one-time passwords sent to the recipients digital device. The one-time passwords enable them to break into bank, credit card, and other financial accounts.
  • Filing fraudulent IRS tax returns Thieves can use a Social Security number to file a bogus tax return, and generate hefty tax reimbursements all under the victims name and without their knowledge.
  • Knowing how to get a new Social Security card makes sense given the potential costs if yours is lost or stolen.

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    What Is A Social Security Card

    Your Social Security card is an important piece of identification. You’ll need one to get a job, collect Social Security, or receive other government benefits.

    When you apply for a Social Security number , the Social Security Administration will assign you a nine-digit number. This is the same number that is printed on the Social Security card that SSA will issue you. If you change your name, you will need to get a corrected card.

    When And How You Can Apply

    How Do I Apply For A Replacement Social Security Card?

    The earliest you can claim retirement benefits is age 62, although you can apply for benefits as soon as you are 61 years and 9 months old if you want the benefits to start no more than four months into the future. For survivor benefits, the rules are different, as typically you become eligible at 60.

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    Are You Currently Healthy

    Your health status may affect your timing decision, although possibly not in the way you expect. Beneficiaries already struggling with poor health in their early 60s may be tempted to take benefits as early as they can.

    Receiving lower payments earlier means you get more benefits over a lifetime if you pass away relatively young. In general, the break-even point falls at about age 80 and 4 months when comparing lifetime benefits starting at 62 with a reduced benefit and starting at 70 with an increased benefit. For those who are currently ill and concerned they wont live to age 80, early benefits may sound like the right call.

    But Weston cautions against this: Starting early is a common timing mistake, especially if you think you wont live beyond the break-even age where the larger checks for waiting more than offset the smaller checks you passed up. Westons concern about this strategy is if you outlive the break-even point and are stuck receiving a reduced benefit while also suffering from poor health. Most people dont understand how long theyre likely to live and the risks if they outlive their savings, Weston explains.Be sure to take careful stock of your financial and physical health when deciding when to start benefits.

    Your Social Security Full Retirement Age Plays A Big Role Know It

    First things first:Determine your Social Security full retirement age. For people born between 1943 and 1954, full retirement age is 66. It gradually climbs toward 67 if your birthday falls between 1955 and 1959. For those born in 1960 or later, full retirement age is 67.

    You can claim your Social Security benefits a few years before or after your full retirement age, and your monthly benefit amount will vary as a result. More on that in a moment.

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    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.

    Why Are Seniors Getting Such A Large Boost

    When to start Social Security

    The reason Social Security is rising so much in 2022 boils down to recent inflation. Annual COLAs are calculated based on third-quarter data from the Consumer Price Index for Urban Wage Earners and Clerical Workers . In September, the CPI-W rose 0.4% from the previous month but was up 5.4% on a year-over-year basis. That’s the highest increase since January of 1991.

    Senior advocates have long argued that basing COLAs on the CPI-W does Social Security beneficiaries a major disservice because many of the costs measured by the CPI-W aren’t necessarily reflective of the expenses that hit seniors’ wallets the most, like healthcare. In addition to rising Medicare premiums, seniors commonly face higher out-of-pocket costs for non-covered services and medications — which is why stingy COLAs have put them at a financial disadvantage for so long.

    In fact, senior advocates are pushing lawmakers to stop using the CPI-W as a measure for COLAs and instead follow the CPI-E — the Consumer Price Index for the Elderly. Tracking a senior-specific index could make for more equitable raises going forward.

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    No More File And Suspend

    Note that the claiming strategy called file and suspend, which allowed married couples who have reached their FRA to receive spousal benefits and delayed retirement credits at the same time, ended as of May 1, 2016. However, spouses born before Jan. 2, 1954, who have attained their FRA may still be able to file a restricted application. It allows them to claim spousal benefits while delaying their own benefits up to age 70.

    Social Security benefits can be taxable if your combined income is high enough.

    Desire To Protect Purchasing Power

    Most people want to collect their Social Security benefits as soon as they are able, which is at age 62. But too often they make this choice without knowing how it might affect them in the future. They don’t take into account the extra income that might come from delaying their start date by even a few years. If you live well into your 80’s, you could be giving up $50,000 to $150,000 in extra income by making a hasty choice about when to collect.

    This is worth thinking about in the context of those golden years. Later in life you may have costs that you don’t have now. For many people, healthcare becomes more costly, or you may have new hobbies to support. Perhaps you’d like to travel more. Also, you’ll be living off of a monthly Social Security check, and maybe from a fund you set up many years ago. Your golden years are not the time you want to be strapped for cash, so before taking any action with the SSA, think about how your choice of when to collect benefits might impact your budget for the rest of your life. Delaying your start date may protect your income, and provide you with a great deal of purchasing power later in life.

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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:

    What Is The Difference Between Spousal And Survivor Benefits

    Start your Program Right

    There are many differences between spousal benefits and survivor benefits. In order to be eligible for spousal benefits, your spouse or ex-spouse must still be living. Survivor benefits are for people whose spouse or ex-spouse has passed away.

    If your spouse or ex-spouse dies and has earned benefits that are higher than yours, you could be eligible for survivor benefits.The size of survivor benefits is based on 1) Your spouse or ex-spouses earnings 2) Your full survivors retirement age and 3) Whether your spouse or ex was receiving reduced benefits . Note that the full retirement age for survivors is different than the full retirement age for Social Security retirement benefits.

    The earliest you can claim survivor benefits is age 60 . There are also other scenarios where you can claim survivor benefits at a younger age , including if you are taking care of a child under the age of 16 or you are disabled.

    With survivor benefits, you also are allowed to file a restricted application . However, with spousal benefits, you have to apply for both your own earned benefit and spousal benefit at the same time. .

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    How Payments Are Paid

    There are two primary ways to receive your Social Security benefit checks:

  • Direct deposit to your bank account, or
  • Direct Express debit card. In 2013, the Social Security Administration stopped mailing out benefit checks in order to reduce expenses.
  • To set up a direct deposit you have three options:

    • Configure through My profile tab in your online Social Security account
    • Ask your bank to do it

    If you choose to receive through a Direct Express debit card, your benefits will be placed directly onto the card. From there, you can withdraw cash, make purchases or pay bills. To sign up, call Direct Express at 800-333-1795.

    What If I Change My Mind

    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.

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    What If I Delay Taking My Benefits

    If you retire sometime between your full retirement age and age 70, you typically earn a “delayed retirement” credit . For example, say you were born in 1951 and your full retirement age is 66. If you started your benefits at age 68, you would receive a credit of 8% per year multiplied by two . This makes your benefit 16% higher than the amount you would have received at age 66. .

    That higher baseline lasts for the rest of your retirement, and serves as the basis for future increases linked to inflation. While its important to consider your personal circumstancesits not always possible to wait, particularly if you are in poor health or cant afford to delaythe benefits of waiting can be significant.

    If you decide to wait past age 65, you may still need to sign up for Medicare. In some circumstancesyour Medicare coverage may be delayed and cost more if you do not sign up at age 65.

    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 .

    An Example Of Taxed Benefits

    Social Security Calculator – When to Start Taking Social Security

    Lets say you receive the maximum Social Security benefit for a worker retiring at FRA in 2021: $3,148 per month. Your spouse receives half as much, or $1,574 a month. Together, you receive $4,722 a month, or $56,664 per year. Half of that, or $28,332, counts toward your combined income for determining whether you have to pay tax on part of your Social Security benefits. Lets further assume that you dont have any nontaxable interest, wages, or other income except for your traditional individual retirement accounts required minimum distribution of $10,000 for the year.

    Your combined income would be $38,332half of your Social Security income, plus your IRA distributionwhich would make up to 50% of your Social Security benefits taxable, because youve exceeded the $32,000 threshold. Now, you may be thinking, 50% of $56,664 is $28,332, and Im in the 12% tax bracket, so the tax on my Social Security benefits will be $3,399.84.

    Fortunately, the calculation takes other factors into account, and your tax would really be a mere $225. You can read all about the taxation of Social Security benefits in Internal Revenue Service Publication 915.

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    Maximizing Your Spousal Benefits

    The earliest you can claim spousal benefits is 62but how early you claim plays an important role in maximizing your benefits. If you claim before you reach your full retirement age, you will permanently lower your monthly benefit and even your survivor benefit.

    While the Bipartisan Budget Act of 2015 ended some of the strategizing around spousal benefits, but there are still ways to maximize your spousal benefits:

    • If you were born before Jan. 2, 1954, and havent claimed your own benefits yet, you are still able to take advantage of the loophole. You can file a restricted application for spousal benefits at your full retirement age. For this to work, your spouse must have already filed for their benefits. This strategy would let you start receiving spousal benefits, while delaying taking your earned benefits, causing them to grow. When you turn 70, you would then switch to those earned benefits .
    • If you were born on Jan. 2, 1954 or later, and you are married, the higher earning spouse may consider delaying claiming their benefits until age 70 to increase the benefit with delayed retirement credits. Keep in mind, this would mean delaying when you can take your own spousal benefits, thus missing out a few years of those payments.
    • If youre divorced, youll get the maximum spousal benefit, 50%, if you wait to reach your full retirement age. But you have the advantage of not needing to wait for your ex to file for his or her own benefits first.

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