When Does It Pay To Enroll In Medicare Before Social Security
You might assume that it pays to sign up for Social Security prior to Medicare, but in many cases, it actually pays to enroll in Medicare first.
Unless youre disabled, you wont be able to enroll in Medicare prior to age 65. And unless youre continuing to work and receive employer-sponsored coverage, theres no benefit to delaying your Medicare enrollment more than three months after you turn 65.
So in almost all cases, your Medicare enrollment window will correspond closely with your 65th birthday, and the coverage you receive under the program wont vary based on when you enroll. But the age at which you sign up for Social Security will dictate what your monthly benefits under Social Security amount to.
Your Social Security benefits are calculated with a formula that uses your average inflation-adjusted monthly wage over your 35 highest-paid years in the workforce. Your resulting monthly benefit will be available to you in full once you reach whats known as full retirement age. That age is currently between 66 and 67, depending on your year of birth.
If you file for Social Security prior to full retirement age, your benefits will be reduced for each month you claim them early. You can also delay your Social Security benefits past full retirement age and boost them by 8% a year in the process, up until age 70, which is generally considered the latest age to claim Social Security.
Lets Start With A Critical Factor: Your Full Retirement Age
Under the original Social Security Act of 1935, workers had to reach age 65 to receive a full retirement benefit.
This full retirement age was actually simply based on the fact that many state pension systems and the Railroad Retirement Benefit system used age 65, so, the Committee on Economic Security the group that designed the US SS system decided to go with an age that was already commonly used.
They also considered using age 70, but ultimately decided that age 65 was more reasonable. Bottom line? Their choice was pretty subjective!
This full retirement age didnt change from the beginnings of Social Security all the way until 1983.
This was the other time in history where, like today, the Social Security trust fund faced a crisis and nearly ran out of money! To keep this from happening, The NATIONAL COMMISSION ON SOCIAL SECURITY REFORM made a series of recommendations to Congress about how to keep the program solvent for the next 50 years.
Social Security Disability Benefits
If you choose to apply for disability benefits and you qualify for Social Security disability, you will receive 100% of your monthly benefit. That 100% rate will continue when it switches over to Social Security when you reach your full retirement age. So, if you can successfully prove your disability case, you will receive more money each month continuously.
Disability claims can be time consuming and challenging, but if you have the proper documentation to support your claim, you should be able to prove your case and be awarded benefits.
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How Much Can You Expect To Get
Your Social Security retirement benefit payment is based on how much you made during your working years. The more you earned, the more you’ll get when you retire.
Your Social Security retirement benefit payment is also affected by the age at which you decide to retire. You can retire as early as age 62, but if you retire before your full retirement age, your benefits will be permanently reduced, based on your age. For example, if you retire at age 62, your benefit would be about 25 percent lower than what it would be if you waited until you reach full retirement age.
You also need to remember that monthly premiums for Medicare Part B are usually deducted from monthly Social Security benefits. Retirement is a great time to look into the pros and cons of a private Medicare Advantage plan.
Retirement benefits are based on the recipients lifetime earnings in work in which they paid Social Security taxes. Higher income translates to a bigger benefit, up to a point. The amount to which retirees are entitled is modified by other factors, most crucially the age at which they first claim benefits.
For reference, the estimated average Social Security retirement benefit in 2021 is $1,543 a month. The maximum benefitthe most an individual retiree can getis $3,148 a month for someone who files for Social Security in 2021 at their full retirement age.
What Is An Early Retirement Exception
The only exception to the above is if you took early retirement at age 62 through Social Security before being approved for disability benefits. In this situation, you are eligible to receive some combination of both benefits.
Lets say you drew less than the full monthly retirement benefit under early retirement, and then you were subsequently approved for disability benefits. Social Security would make up the difference between the amount allotted for early retirement and the full disability amount for the months during which you were disabled and receiving reduced early retirement benefits.
This is a retroactive benefit. In this situation, you would also get the benefit of a disability freeze, meaning your lack of income as a result of your disability would not be counted when your Social Security retirement payment was calculated from your earnings record.
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To Qualify For Medicare You Need To Get Disability Benefits From:
- Social Security
- Railroad Retirement Board
If you or your spouse worked for a railroad, call the Railroad Retirement Board at 1-877-772-5772.
If you live in Puerto Rico or outside the U.S.
Should I Wait Until Full Retirement Age To Apply For Social Security
Receiving Social Security at age 62 means that you will receive a reduced payment compared with waiting for full retirement age. For those born in 1960 or later, the reduction is 30%, and all reductions are permanent. If you delay taking your benefits past full retirement age, then you receive an 8% increase for each full year that you do so, up until you reach 70, at which point the increases stop.
Every individual can calculate their own full retirement age based on their specific birthday, to consider locking in the maximum amount of Social Security benefits.
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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.
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.
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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.
A Reader Poses A Question Thats Trickier Than It Seems
One of the things I think Im pretty good at is answering questions about federal retirement, but a recent email about Social Security left me stumpedtwice.
Greg, a longtime federal employee, wrote to me:
Social Security benefits max out at age 70, I get that. But filing too soon loses a portion of the maximum amount, and filing too late loses a whole monthly benefit. I have searched all over, and nowhere can I find out exactly what the best date is to request benefits begin. My wife reaches age 70 in the middle of April and we were wondering how to maximize her benefit by selecting the best starting date.
I thought Greg was asking a very common question: When is the best time to file for Social Security retirement? So I replied as follows:
There are a lot of theories about claiming Social Security benefits. Social Security has a fact sheet on this question as well. There are many factors that can influence the best time for you:
- Are you married or single?
- What is the age difference between you and spouse, if married.
- What is the income difference between you and your spouse, if married.
- Do you have children age 18 or younger?
- Are you widowed?
- Are you still working or fully retired?
- Do you have other sources of retirement income that could bridge the time between retirement and a later application for Social Security?
- Do you have good health and family history that shows longevity?
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When To Sign Up For Social Security
The leading edge of the baby boomer generation turns 63 this year. Last year, at age 62, the oldest boomers became eligible for early Social Security, so there is an important question about when to sign up.
The Social Security website has recently launched a new Retirement Estimator that will calculate your monthly benefit, based on your actual earnings, at different retirement dates. The amount is an estimate due to various parameters used, but it isnt far off and is a big help in deciding when to retire.
Sixty-five was once the absolute age for full benefits for everyone, but the SSA has been gradually raising the age to 67, depending on year of birth. I, for example, born in April 1941, was not eligible for full benefits until age 65 and eight months October 2006.
There is a good-sized monetary benefit for delaying benefits. Every year you wait between ages 62 and 65, your monthly payment increases by five or six percent. After age 66, each additional year adds about eight percent.
If you can wait until age 70 your benefit, compared to age 62, increases by about $1,000 per month. $12,000 a year is a big difference.
Of course, many factors, personal and professional, enter into the decision: whether you have another pension plan, whether you have a job or have been laid off, investments, your health, the amount of debt you are carrying, etc.
Calculate The Best Time To Start Social Security
If you are confused about when to start, you can use the Social Security Explorer part of the NewRetirement Retirement Planner to compare your monthly income and maximum lifetime payout at different ages.
Or, you might consider the following rules of thumb:
- Take Early: The only people who should consider taking their Social Security early are those who absolutely need the money immediately, or those who do not expect to live for very long, due to illness
- Take at Full Retirement Age: Should you have reason to believe that you will not live past the age of 80, then generally speaking you will maximize your social security benefits if you take them when you reach your Full Retirement Age.
- Wait as Long as Possible: On the other hand, if you are confident that you will live past the age of 80 or 85, then most experts recommend that you defer your social security for as long as you can , so as to maximize the benefits you receive from it.
- Other: If you have dependent children, the additional benefits you receive for them might make filing when you are younger worthwhile.
It can also be a very good idea to have an overall retirement plan before you decide when to start your Social Security benefits. The NewRetirement Retirement Planner can help you assess all of your sources of retirement income and whether or not you will have enough to cover your expenses. This tool was recently named a best retirement calculator by the American Association of Individual Investors .
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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
How To Calculate Social Security Benefits
Lets say your FRA is 66. If you start claiming benefits at age 66 and your full monthly benefit is $2,000, then youll get $2,000 per month. If you start claiming benefits at age 62, which is 48 months early, then your benefit will be reduced to 75% of your full monthly benefitalso called your primary insurance amount. In other words, youll get 25% less per month, and your check will be $1,500.
That reduced benefit wont increase once you reach age 66. Rather, youll continue to receive it for the rest of your life. It may go up over time due to cost-of-living adjustments , but only slightly. You can do the math for your own situation using the Social Security Administration Early or Late Retirement Calculator, one of a number of benefit calculators provided by the SSA that can also help you determine your FRA, the SSAs estimate of your life expectancy for benefit calculations, rough estimates of your retirement benefits, individualized projections of your benefits based on your personal work record, and more.
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Apply For Retirement Benefits
Starting your Social Security retirement benefits is a major step on your retirement journey. This page will guide you through the process of applying for retirement benefits when youre ready to take that step. Our online application is a convenient way to apply on your own schedule, without an appointment. You can also apply by phone or by appointment at a Social Security office.
No One Else Is Relying On Your Benefits
In the event of your death, a surviving spouse, minor or disabled child can receive money from the Social Security Administration based on the amount of your benefits. For example, a surviving spouse can receive between 71.5% and 100% of your benefit amount, depending on the surviving spouse’s age. A disabled child can receive 75% of your benefits each month even after you’re gone.
If no one else can qualify for benefits based on your record, you might want to retire early because no one is depending on that money. If everything else falls into place and you meet the minimum Social Security retirement age, consider collecting your benefits early and enjoying life.
Your Social Security Benefits Will Be Taxed
Most people know that you pay tax into the Social Security Trust Fund throughout your career, but did you know that you may also have to pay tax on your Social Security benefits once you start receiving them? Benefits lost their tax-free status in 1984, and the income thresholds for triggering tax on benefits haven’t been increased since then.
As a result, it doesn’t take a lot of income for your Social Security benefits to be pinched by Uncle Sam. For example, a married couple with a combined income of more than $32,000 may have to pay income tax on up to 50% of their Social Security benefits. Higher earners may have to pay income tax on up to 85% of their benefits.
You may also have to pay state income taxes on your Social Security benefits. See our list of the 13 States That Tax Social Security Benefits.
How Does Work Affect Social Security Benefits
You can receive Social Security benefits and work at the same time. In fact, you can collect at age 62 whether youre working or not. However, if you collect benefits before your full retirement age, your benefits will be temporarily reduced by $1 for every $2 you earn above $18,960 per year in 2021. If you work during the year you reach full retirement age, $1 in benefits will be deducted for every $3 you earn above a higher limit , but only counting earnings before the month you reach your full retirement age.
Once you reach full retirement age, you can receive your benefits with no limit on your earnings. You are also paid back the earnings that were held while you were working.
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