Sunday, August 14, 2022

How Early Can I Draw My Social Security

Don't Miss

Reasons You Should Claim Social Security Early

Should I Collect Social Security Early and Invest it?

Learn why Social Security at 62 might not be a bad idea. Social Security 101

Your retirement planning likely includes getting income from the Social Security Administration, but when you start collecting Social Security benefits can have a big impact on your planning. The earliest you can collect is age 62, but youll get more money if you delay your benefits past your initial Social Security eligibility. If you wait until after your full retirement age to start collecting Social Security you can earn delayed retirement credits, which will increase your benefits even more.

Read: When Social Security Runs Out: What the Program Will Look Like in 2035

You might think that waiting for bigger benefits is better, but thats not always the case. There is no definitive answer to when you should collect Social Security benefits, and taking them as soon as you hit the early retirement age of 62 might be the best financial move.

Supplementing Your Social Security Income

For many retirees, the income they receive from Social Security is not enough to live off of: According to AARP, the estimated average Social Security monthly benefit in 2022 is $1,657. If you haven’t started saving for retirement it’s essential to start early so you can take advantage of the power of compound interest .

If your company offers an employer-sponsored 401 with matching contributions, you should prioritize receiving the match because it’s essentially free money.

You might also consider opening an individual retirement account, either a traditional IRA or a Roth IRA, both of which have unique tax benefits.

With a traditional IRA, individuals invest pretax income and don’t pay taxes until they withdraw their earnings. With a Roth IRA individuals invest after-tax money so their withdrawals are tax-free. A Roth IRA is considered a good option for those who anticipate being in a higher income tax bracket in retirement: Rather than paying higher taxes later on, you’ll pay taxes on your contributions upfront.

A Roth IRA, however, is not available to everyone. For 2022, the income limit for single-filers is $144,000 and for married couples filing jointly it’s $204,000. Companies like Vanguard, Wealthfront, Betterment, and Fidelity Investments all provide traditional and Roth IRA options.

Report The Death Of A Social Security Or Medicare Beneficiary

You must report the death of a family member receiving Social Security or Medicare benefits. The Social Security Administration processes death reports for both. Find out how you can report a death and how to cancel benefit payments. In addition to canceling SSA and Medicare benefits, find out what other benefits and accounts you should cancel.

Don’t Miss: Socia L Security

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.

You Want The Money Now

Can I Collect Social Security Retirement and Disability Benefits at the ...

Even if you don’t need your benefits early to support yourself, you may have other reasons for wanting to take them as soon as possible. Some people, for example, are concerned that Social Security may be unable to meet all of its obligations in the future, so they might as well get theirs now. Others believe they could do better by collecting benefits and investing them, rather than leaving it in the government’s hands.

That said, you would have to be a skilled investor to beat the 6% to 8% guaranteed annual return on your money that Social Security offers to those who wait until full retirement age or later.

Recommended Reading: Social Security.

Could I Be Eligible For The Canada Pension Plan And The Quebec Pension Plan

If you contributed to the CPP or the QPP in at least one year, you will be eligible for a retirement pension from one plan or the other as early as age 60.

The amount of your CPP retirement pension will depend on how much and for how long you have contributed to the CPP and on your age when you want your pension to start.

If you start your CPP retirement pension at age 65, you will get the full pension amount that you are eligible to receive. However, you can choose to start receiving a reduced pension as early as age 60 or an increased pension for every month you delay receiving it up to age 70.

For more information about CPP pension amounts and eligibility, visit Canada Pension Plan.

You must apply to receive your CPP or QPP retirement pension.

Note: Post-Retirement Benefit

The Post-Retirement Benefit is a lifetime benefit that can increase your retirement income if you work while receiving the CPP retirement pension. Contributions are mandatory for working CPP retirement pension recipients under age 65 and their employers. At age 65, these workers can choose to stop contributing. There are no contributions after age 70. For more information, visit Canada Pension Plan Post-Retirement Benefit .

The CPP and QPP also provide disability and survivor benefits. You must apply to receive these benefits.

  • TTY: 1-800-603-3540

The Old Age Security Program

The OAS program is the Government of Canada’s largest pension program.

You do not have to pay into the OAS program since it is funded through general tax revenues.

In addition to the OAS pension, there are three types of income-tested benefits that provide additional support to seniors with low incomes:

  • the Guaranteed Income Supplement
  • the Allowance
  • the Allowance for the Survivor

Recommended Reading: What Comes Out Of Social Security Check

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.

Financial Benefits Of Working Longer

Collecting Social Security at 62 How They Feel About It Now

Many people want to retire as soon as it is financially feasible to do so, but it’s crucial to consider the earning and investing power you may give up if you stop working full-time and take Social Security at 62. If you leave a job with good pay and benefits, it may be difficult ever to regain that level of compensation if you need or want to return to work later. Of course, not everyone can keep working, but it is something to consider if you are healthy and have the opportunity to stay in the workforce, in either a full-time or part-time capacity.

The compensation benefits of your job could also affect your Social Security. Some companies allow stock awards to continue to vest after retirement date, and even into years to follow. These payouts are considered income, and could cause your Social Security payment to be taxed, or taxed at a higher level than in years after the awards have fully distributed. Delaying Social Security payments until those other income sources have been reported for tax purposes is worth consideration.

But there’s even more to the story. As you approach retirement, you’re often at the upper end of your lifetime earnings trajectoryand of your ability to save more for retirement. In addition, if you can keep working, you can make “catch-up” contributions to a tax-deferred workplace savings plan like a 401 or 403 or a traditional or Roth IRA. Catch-up contributions allow you to set aside larger amounts of money for retirement.

You May Like: Social Security Figure Your Benefit

Reasons To Take Social Security At Age 62

For most people, the reasons to take Social Security at a later age far outweigh the reasons to take it at 62. There are exceptions, though:

  • Your earned income will be below the annual earnings limit, so your benefits won’t be withheld.
  • You have health issues and/or a shorter-than-average life expectancy, and, if married, your spouse has a larger benefit than your own.
  • You have no other accounts to withdraw from and no way to earn income, so you must take Social Security at 62.

Many people underestimate the true value of their Social Security benefits. By looking at how much you receive over your life expectancy, you’ll be able to make an informed decision about whether to take your benefits at age 62.

Income Limits For Social Security Retirement Benefits

Many people ask, How much can you earn in 2021 and draw Social Security? The annual limit for 2021 is $18,960 for those who have not reached full retirement age. So, suppose that you begin receiving benefit payments at age 62. This special rule states that you can have no more than $18,960 in annual earnings or else your benefits will be reduced. Keep in mind that the earnings limit only applies to money earned from work. It does not include earnings from investments like an IRA or capital gains. However, if a spouse or child receives benefits based on your work record, their benefits will be reduced as a result of your earnings as well.

If you claim benefits and have been working for the entire year, then it might be a good idea to check out the SSAs earnings test calculator. You should know that it is your responsibility to notify the Social Security Administration of your earnings. Failure to notify SSA might mean that your benefits do not get appropriately reduced, especially in your first year of working. You might continue receiving your full monthly checks, and then you will be forced to repay those extra benefits when you file your income taxes. You might even owe some additional fines and penalties as well. Be sure that you are aware of these rules when it comes to allowable monthly income so that you do not find yourself in this situation.

Recommended Reading: Social Security Infomation

Can I Qualify For Ssi While Collecting Social Security Retirement Benefits

While you cannot collect Social Security retirement and SSDI at the same time to increase your benefits beyond the full retirement amount, there is a program that may allow you to collect additional income.

SSI, which stands for Supplemental Security Income, is a Social Security program that helps seniors and those with a disability who have an extremely low income or limited assets. To qualify for SSI, you need to meet strict income qualifications and have only a minimum amount of resources. Resources, as the SSA defines the term, can be anything that can be turned into cash, such as:

  • Bank accounts, stocks, or U.S. savings bonds
  • Land

Limits On Earned Income If Claiming Early Benefits

How Much Social Security Will I Get If I Claim at Age 62 and My Full ...

Until you reach full retirement age, Social Security will subtract money from your retirement check if you exceed a certain amount of earned income for the year. For the year 2021, this limit on earned income is $18,960 . The amount goes up each year. If you are collecting Social Security retirement benefits before full retirement age, your benefits are reduced by $1 for every $2 you earn over the limit. Once you reach full retirement age, there is no limit on the amount of money you may earn and still receive your full Social Security retirement benefit.

Example

Henry is considering claiming early retirement benefits this year, at age 64. Social Security calculates that if he does so, he’ll receive $866 a month . But Henry also intends to continue working part-time, with an income that will be about $5,000 over the yearly limit on earned income. If he does claim the early benefits and makes that part-time income each month, Henry would lose one dollar out of two from the $5,000 he earns over the limit, which means $2,500 for the year. So, by claiming early retirement and continuing to earn over the limit, Henry incurs a double penalty: His retirement benefits are permanently reduced by 13%, and he loses an additional amount every month to the extent he earns over the income limit.

Social Security does not reduce each monthly check by a small amount, unfortunately. Instead, the agency may withhold several months’ entire checks until the reduction is paid off.

Read Also: How Much Can I Get In Social Security Benefits

Spouses Who Dont Qualify For Their Own Social Security

Spouses who didnt work at a paid job or didnt earn enough credits to qualify for Social Security on their own are eligible to receive benefits starting at age 62 based on their spouses record. As with claiming benefits on your own record, your spousal benefit will be reduced if you take it before reaching your FRA. The highest spousal benefit that you can receive is half of the benefit that your spouse is entitled to at their FRA.

While spouses get a lower benefit if they claim before reaching their own FRA, they will not get a larger spousal benefit by waiting to claim after their FRAsay, at age 70. However, a nonworking or lower-earning spouse may get a larger spousal benefit if the working spouse has some late-career, high-earning years that boost their benefits.

When Will My Pension Payments Begin

Your pension payments will begin during one of the following months, whichever is latest:

  • the month after you meet the residence and legal status requirements
  • the month after your 65th birthday
  • the month you asked for your OAS pension to start in and that you meet all eligibility requirements

For information on payment amounts, visit Old Age Security payment amounts.

Don’t Miss: How Much Social Security Am I Entitled To

You Have A Shorter Life Expectancy

The government incentivizes waiting to collect your Social Security benefits by giving you a larger monthly amount the longer you delay. For example, if you start collecting benefits at age 62 when your full retirement age is 66, your monthly benefit will be about 75% of your full-age benefit. So if you expected your monthly benefit to be $1,000 per month at 66, you would only receive around $750 at 62.

Although a larger monthly benefit might sound great, keep in mind that youd have to wait four years to get that extra $250 per month. You would receive $36,000 during those four years at the reduced amount of $750 per month.

When you start collecting $1,000 at age 66, that extra $250 per month wont let you break even for 12 years compared to collecting early. If your health is declining and you dont expect to live until youre 78, youll receive more in benefits during your lifetime if you start claiming as soon as possible.

How To Stop Social Security Check Payments

Best age to collect Social Security. Should I collect now or later?

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.

Don’t Miss: What Can You Earn On Social Security

What Is The Future Of Social Security

If you’re 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 it’s better to have something than nothing. The 2021 annual report from the Social Security Trustees, released in August 2021, projects that the Social Security Trust Fund has enough resources to cover all promised benefits until 2034. Then, absent a change from Congress, the trustees project that benefits would need to be cut for all current and future beneficiaries to about 78% of scheduled benefits. The 2021 report includes the trustee’s best estimates of the impact from the pandemic, which were not reported on last year.

Over the longer term, changes such as later benefit dates or means testing may be considered.

In any situation, if you’re particularly concerned about the future prospects for Social Security, that’s a good reason to save more, and earlier, for your retirement.

What To Consider Before Filing For Social Security

A larger benefit check sounds great, but there are tradeoffs, and soon-to-retire folks should consider multiple issues before they decide one way or the other on when to file. If you really want to consider all the avenues, then youll have to think about your finances and longevity two issues that people have a hard time grappling with.

But heres the key trade-off: you can file early and take a reduced benefit, expecting that a shorter life span will mean you receive more now, or you could file at full retirement age or later and claim a bigger check, and eventually live long enough to claim more than the first approach.

Social Security is like longevity insurance, says Brent Neiser, a Certified Financial Planner and former chair of the Consumer Advisory Board at the Consumer Financial Protection Bureau. Its a stream of payments that will not stop throughout your life, so delaying your benefits to keep those payments as large as possible forms a helpful base to your retirement plan.

Neiser urges those who have not saved enough for retirement to use whatever means possible to postpone their Social Security benefits until after their full retirement age to help boost their future income.

You can use personal savings to help bridge the gap, but ideally you should plan to work a little longer , Neiser says.

You May Like: When I Can Collect Social Security

More articles

Popular Articles