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.
If You Haven’t Applied For Retirement Benefits Yet
Spouses who are eligible for both the survivor benefit and the retirement benefit based on their own work record, can maximize their total benefits by taking them in the most advantageous order. The Social Security Administration explains how this works:
If you are also eligible for retirement benefits , you have an additional option. You can apply for retirement or survivors benefits now and switch to the other benefit at a later date.
The right order for you will depend on the size of each benefit. If both payouts currently are about the same, it may be best to take the survivor benefit at age 60. It’s going to be reduced because you’re taking it early, but you can collect that benefit from age 60 to age 70 while your own retirement benefit continues to grow. Then you can collect your own benefit starting at age 70 when it maxes out.
Conversely, if your own benefit is small compared to the survivor benefit , you could take your own benefit at;age 62, which is the earliest age at which you’re eligible. Then, at age 66,;you could switch over to the survivor benefit. However, the survivor benefit would be reduced since it was taken early or before full retirement age.
When Your First Benefit Will Be Paid
Only 7% of people can actually receive their Social Security earned income for the calendar month of their birthday, and of that small group, none will collect the benefit during the calendar month of their birthday. This is due to the odd way that the Social Security Administration segments people based on their birthday, and SSA rules around schedule of payments.;
It helps to know that the SSA considers you to be born 24 hours before you were truly born. So, if you were born on April 1, the SSA considers you to have been born on March 31. If you were born on April 2, it considers you to have been born on April 1. This is important because Social Security benefits are not paid for partial months; in order to receive benefits for a given month, a beneficiary must be eligible for those benefits every day of that month.
Thus, for people who turn 62 in April, only those born on April 1 ;and April 2 are able to receive a benefit in the month when they turn 62. Otherwise, the first Social Security payment will be for the month of May.
But this is only part of the story, since receiving a benefit for the month of your birthday is not the same as receiving a benefit during the month of your birthday. Social Security benefits including earned, survivor and disability are paid a month late, meaning that a benefit that relates to the month of April will be paid out in May.;
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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 A Social Security Break
Figuring out the right time to start taking Social Security benefits isnt always a straightforward process. A Social Security break-even calculator can help you get some perspective on the numbers so you know what you stand to gain or lose by taking benefits earlier versus later.
Social Security break-even calculators help you find the best age to start taking retirement benefits. They do this by comparing your cumulative Social Security retirement benefits paid at age 62, your full retirement age and at age 70 and estimating how long it would take the benefits paid at age 70 to break even with benefits paid starting at age 62.
Heres a simple calculation to give you an idea of how a Social Security break-even calculator works. Say that you have the option to begin receiving $1,200 a month in benefits at age 62. Youd receive $1,700 in benefits if you wait until full retirement age at 66. Or you could receive $2,200 a month in benefits by delaying them until age 70.
The break-even point represents when the cumulative benefits even out. So if you wait until age 70 to start taking benefits, it would take you until age 79 to break even with the benefit amount youd receive if you started taking them at age 62. If you were to start receiving benefits at age 66, it would take you until age 75 to break even with the benefits youd receive if you started them at 62.
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How Do Benefits Work And How Can I Qualify
While you work, you pay Social Security taxes. This tax money goes into a trust fund that pays benefits to:
Those who are currently retired
To people with disabilities
To the surviving spouses and children of workers who have died
Each year you work, youll get credits to help you become eligible for benefits when its time for you to retire. Find all the benefits Social Security Administration offers.
There are four main types of benefits that the SSA offers:
Learn about earning limits if you plan to work while receiving Social Security benefits
Deferring Your Old Age Security Pension
You do not have to start receiving your OAS pension when you turn 65. You can start receiving it any time after age 65. The longer you delay receiving it, the more money you will receive. Your monthly pension payment will be increased by 0.6 percent for every month you delay receiving it after age 65, up to a maximum of 36 percent at age 70.
If you choose to delay receiving your OAS pension after age 65:
- you will not be eligible for the Guaranteed Income Supplement for low-income seniors during the period you are delaying your OAS pension
- your spouse or common-law partner will not be eligible for the Allowance for the period you are delaying your OAS pension. The Allowance is a monthly benefit available to the spouse or common-law partner of an OAS recipient who is eligible for the GIS
To decide when to start receiving your OAS pension, you should consider your personal situation. It may affect other benefits that you, or your spouse or common-law partner could receive. You should take into account your:
- current and future sources of income;
- employment status now and in the future
- plans for retirement
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.
When Should I Apply
If you were not selected for automatic enrollment, and if you want to start receiving your OAS pension, you should apply at least six months before your 65th birthday.
If you are already 65 and want to start receiving the OAS pension, send your application as soon as possible so you wont lose any payments.
If you are applying for your OAS pension after you turn 65, and you do not want to delay the receipt of your pension, we will give you a retroactive payment for up to 12 months. You may be eligible for retroactive payments covering a longer period if, due to a medical condition, you can show that you were unable to apply earlier or to ask someone to apply on your behalf. If you are sentenced for two years or more in a federal prison you may still apply for your OAS pension. However, you will not receive pension payments while you are serving your sentence. You must notify Service Canada in writing of your release and your OAS pension payments will begin the month of your release.
For more information, visit Old Age Security.
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Social Security Disability Benefits
The final category of Social Security benefits applies if you suffer an injury or illness that leaves you unable to work. These benefits are paid from the Disability Insurance Trust Fund.
A person qualifies for disability benefits after working long enough to be eligible for Social Security before becoming disabled. You must meet certain criteria defined by the SSA, including severe disabilitya disability that has lasted or is expected to last at least one year or result in death, with the person deemed unable to perform any work. The benefit begins six full months after the onset of the disability. This benefit is for life unless the SSA determines that you no longer qualify.
When Benefits Will Begin
If your application is approved before you reach at least the minimum retirement age for people born in the same year as you, you will typically begin receiving your Social Security retirement benefits one month after you are entitled to receive them. For instance, if you are eligible to receive benefits beginning in February, you will receive your first payment in March.
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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.
B You Can Stop Working And Start Receiving Your Retirement Benefits
If you make the decision to stop working and start receiving retirement benefits before your full retirement age, your benefits are reduced a fraction of a percent for each month before your full retirement age. Also, your benefits will not increase because of additional earnings.
We calculate your benefits based on your highest 35 years of earnings, and if you stop working before you have attained 35 years of earnings or you have years with low earnings, this will affect your benefit calculation.
If you delay your benefits until after full retirement age, you will be eligible for delayed retirement credits that would increase your benefit.
If you stop working and start receiving retirement benefits before age 65, you are automatically enrolled in Original Medicare when you turn 65. If you are not receiving your Social Security benefits when you turn 65, you will need to apply for Medicare benefits three months before you turn 65. If you dont sign up for Medicare Part B when youre first eligible, you may have to pay a late enrollment penalty for as long as you have Medicare coverage.
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How Do You Apply For Benefits
When you are ready to apply for Social Security benefits, you can apply in a number of ways. For individuals living in the United States, applications can be taken over the phone, online or by visiting a local Social Security office.
Individuals who do not reside within the United States or any of its territories must contact the nearest U.S. Social Security office, Embassy or consulate.
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.
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.
How To Stop Social Security Check Payments
The SSA can not pay benefits for the month of a recipients death. That means if the person died in July, the check received in August must be returned. Find out how to return a check to the SSA.
If the payment is by direct deposit, notify the financial institution as soon as possible so it can return any payments received after death. For more about the requirement to return benefits for the month of a beneficiarys death, see the top of page 11 of this SSA publication.
Family members may be eligible for Social Security survivors benefits when a person getting benefits dies. Visit the SSA’s Survivors Benefits page to learn more.
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Beware The Blackout Period
As noted;earlier, a widow or widower generally doesn’t qualify for their own benefits;until age 60. However, that person can collect payouts as the caregiver for the deceased’s children until they turn 16.
The kids themselves qualify for benefits until they turn 18 . But between the child’s 18th birthday and the spouse’s 60th birthday , no one in the family is eligible to collect. That’s what’s known as a blackout period.
Consider, for example; a woman is left widowed at the age of 30 with a two-year-old son. As her son’s caregiver, she is entitled to collect Social Security benefits for 14 years, until his 16thbirthday. After that, her son continues to receive his survivor benefits for two more years, until he’s 18. His mom will be 48 at that point, leaving the family ineligible for any payments until her widow’s benefits become available when she’s 60. In this case, the Social Security blackout period lasts 12 years.
One possible solution is for families to make sure they have adequate life insurance to support a surviving spouse during any blackout period. Take, for instance, a couple, both;31 years old, who recently had a child. If either parent dies, the surviving spouse is eligible to collect benefits until they are 47 years old . If they both buy 30-year term life insurance policies and keep up with the premiums, they’ll be assured of coverage until age 61one year after Social Security eligibility is reinstatedin case one of them dies.
Why You Should Start Collecting Social Security Benefits Long Before Turning 70
If you want your monthly Social Security benefit to be as large as possible, you’ll have to wait until age 70 to claim it. But that’s not the right choice for everyone despite the fact that;delaying earns you bigger checks.
In fact, there are plenty of circumstances when you’d want to start your retirement benefits much sooner even as soon as 62 when you first become eligible. And there’s one situation where starting at a younger age absolutely makes sense.
Here’s what it is.
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