How Does Full Retirement Age Affect Your Social Security Benefits
If you claim your benefits at full retirement age, you will receive your standard Social Security benefit amount. If you claim prior to FRA, you will be subject to early filing penalties that reduce your benefit by the following amounts:
- 5/9 of 1% for each of the first 36 months before FRA
- 5/12 of 1% for each subsequent month before FRA
This amounts to a 6.7% annual reduction for each of the first three years and an additional 5% reduction for each following year before FRA. If you claim benefits at 62 with an FRA of 67, you will face a full 30% reduction in benefits.
By contrast, if you claim benefits after FRA, you receive delayed retirement credits valued at 2/3 of 1% per month. This results in an 8% annual increase to your monthly benefit. Delayed retirement credits can be earned until age 70, after which time there is no financial benefit to delaying your claim. Delayed retirement credits cannot be earned if you are claiming either spousal or survivor benefits.
What You Need To Know About Social Security
First off, let’s establish some basics about Social Security. The Social Security administration determines a worker’s benefit, known as the primary insurance amount , by using a calculation based on a worker’s 35 highest earning years, says Kiner.
Workers are able to start collecting benefits at age 62 but their benefit will be reduced if they don’t wait until full retirement age. Full retirement age is between 66 and 67, depending on when you were born.
If you wait until you’re at full retirement age to collect, you’re eligible to receive 100% of the benefits that you’re entitled to. For every year after full retirement age that you delay receiving benefits, your benefits will increase 8% each year.
How Much Will I Get From Social Security
Your retirement benefit is based on your lifetime earnings in work in which you paid Social Security taxes. Higher income translates to a bigger benefit . The amount you are entitled to is modified by other factors, most crucially the age at which you claim benefits.
For reference, the estimated average Social Security retirement benefit in 2022 is $1,657 a month. The maximum benefit the most an individual retiree can get is $3,345 a month for someone who files for Social Security in 2022 at full retirement age , the age at which you qualify for 100 percent of the benefit calculated from your earnings history. FRA is 66 and 2 months for people born in 1955, 66 and 4 months for people born in 1956, and is gradually rising to 67 for those born in 1960 or later.
Youll only know your own amount for sure when you apply, but there are ways to get a sense of it in advance. The quickest and easiest is to use AARPs Social Security Benefits Calculator or check your online My Social Security account. The latter draws on your earnings record on file with the Social Security Administration for the AARP calculator, youll need to provide your average annual income.
Keep in mind
Social Security sets a cap on how much of your income it takes into account in figuring your benefit. In 2022 the cap is $147,000 . Any income above that is not counted in your benefit calculation .
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Other Benefits Will Be Delayed If You Delay Your Old Age Security Payment
If you are not in receipt of the Old Age Security pension:
- you cannot get the Guaranteed Income Supplement
- your spouse cannot apply for the Allowance
Note: The Guaranteed Income Supplement and Allowance amounts dont increase when you delay receiving Old Age Security pension payments. You cannot receive the Guaranteed Income Supplement and your partner cannot receive the Allowance when you are not receiving the Old Age Security pension.
When monthly increases are not applied
If you decide to delay receiving the Old Age Security pension, you will not receive monthly increases during any month where you are:
- in federal prison as a result of a sentence of 2 years or longer
- outside Canada, have less than 20 years of residence in Canada and do not qualify under an international social security agreement
How To Calculate Social Security Benefits
If youd just like a ballpark estimate of your benefit, the Social Security Administration offers a quick calculator to give you a sense of your potential benefit. This calculator simply asks for your current annual salary, your birth date and your projected retirement date, although it does allow you to fill in your actual income by year to get a more accurate estimate.
This estimate does not take early or late application for benefits, taxes and Medicare, or COLA increases into account. Youll likely need to download the Social Security Administrations full calculator software or work with a financial advisor to determine your full benefits considering those factors.
Knowing how much you can expect to receive in Social Security gives you an important piece of your retirement income puzzle. With that in hand, you can make the financial plans you need for a secure and fulfilling retirement.
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How Much Can I Earn While On Social Security // 2021 Limits
Many people find themselves in a position needing to work another job while receiving Social Security benefits. Perhaps the retirement benefits they receive are not enough to make ends meet. So, how does working affect the benefits that you will receive? The Social Security Administration has strict rules about working while receiving benefits. They place an earnings limit on the amount that you can earn before your monthly benefit becomes affected. So, what is this earnings limit and how will it affect your benefits? Keep reading to learn all the details of how an extra income might affect your Social Security income.
How Much Do Children Receive In Social Security Benefits
A child may receive a Social Security benefit equal to 50% of the parents full retirement benefit or disability benefit. If the parent is deceased, the child is eligible to receive up to 75% of the parents full retirement benefit.
There is a limit to the total amount that a family can receive from Social Security based on one worker’s earnings record, though. The maximum family benefit typically ranges from 150% to 180% of the parent’s full benefit amount. That is the formula for maximum family benefits based on a retired parent’s work record. If the parent is disabled, a different formula applies.
If the amount due the entire family surpasses the maximum, some individual payments will be proportionately reduced. As an example, consider a retiree named June, who has a dependent child, Ruth, who is also eligible for benefits. June’s full retirement amount is $1,500, and her family maximum is $2,300. June would receive her full $1,500 per month, while her spouse, John, and daughter Ruth would split the remaining $800 payment, each receiving $400.
SSI benefits are determined by a different calculation, and the maximum benefit changes each year. Some states also supplement SSI. In addition, a disabled child who collects SSI may also be eligible for Medicaid to help pay for medical bills.
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How To Use The Social Security Benefits Calculator
Not sure where to start? Let us help you:
Maximum Social Security Payment
Making Social Security’s annual maximum earnings is challenging for most people. High-earning individuals are eligible for a higher monthly Social Security payment if they have met the SSA’s maximum taxable earnings each year for at least 35 years of work. The SSA reports the maximum monthly Social Security benefit an individual can receive in 2022 is:3
|Retire early at age 62||$2,364|
|Retire at full retirement age||$3,345|
|Retire at age 70||$4,194|
Jeff Hoyt, Editor-in-Chief at SeniorLiving.org, and Mary Beth Franklin, Certified Financial Planner and Contributing Editor of InvestmentNews, take a deep dive into maximizing your Social Security payout. Watch the video below for more information.
Pro Tip:AARP notes if you wait longer than your full retirement age to claim Social Security, you can earn delayed retirement credits to increase your eventual benefit by two-thirds of one percent for every month you wait.
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Thinking About Retirement Check This Article
Financial hardships are becoming common occurrence during this pandemic, but as the economy starts to rise and more people return to their jobs, several changes to economic programs and social security benefits, have occurred and people want to know how much they can get from their monthly checks.
Let’s cut to the chase, the maximum amount of money you can get from Social Security payments depends, among other factors, on the age at which you start collecting and your earnings history. In 2022, the maximum is $3,240 a month for someone filing for full-age retirement at age 66. But $4,194 is the highest benefit in absolute terms for those who qualify and delay applying until age 70.
Why Is My Social Security Benefit Much Higher When I Tick The Married Box
Including a spouse increases your Social Security Benefits by 1.5 times your individual estimated benefit. Or to put it another way, it gives you an extra 50% on top of what you would normally receive. This is to support people whose spouses do not work and therefore have no Social Security Benefit of their own.
If your spouse does work, they will be collecting their own Social Security Benefits post-retirement, so do not check the Married box in this case. You will need to run the calculator separately for their income in order to ascertain your total.
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Penalties For Collecting Benefits Early
The SSA never promised that there wouldnt be any math involved, but there is.
Workers can now start collecting Social Security checks when they turn 62, but theres a penalty for beginning that early. The benefit will be reduced by 5/9 of one percent for every month before a recipient reaches full retirement age, up to three years. If consumers begin withdrawing benefits more than three years before full retirement age, then benefits are reduced by 5/12 of one percent each month.
As an example, if a person decided to collect Social Security at age 62, then the benefit would be reduced by 30% on a monthly basis to the primary beneficiary. Putting that into real numbers, someone who is getting a $1,000 retirement benefit would have that total reduced by $300. A spouses benefit would also be reduced by 35%. If a spouse was receiving $500 per month, then they would get $325 per month going forward.
To make things simpler, the SSA has prepared a benefits planner that includes a chart on retirement ages. Its available here.
What If My Local Social Security Office Is Closed Due To Covid
Due to the current pandemic, local offices remain closed to walk-in traffic. Your best option is utilizing your My Social Security account and attempting to complete your request online. You can also call SSA at 800-772-1213. In some limited cases, in-person appointments can be made for people unable to complete their request online or over the phone.
The Basics Of Social Security
First off, every eligible worker can begin receiving Social Security benefits at age 62, but you’ll get a reduced monthly payment if you don’t wait until you’re at full retirement age. Your monthly payment will depend a few things, including your income throughout your working years, how much you paid into the Social Security system and at what age you claim benefits. Benefits are adjusted yearly based on the cost of living.
Full retirement age depends on the year you were born:
- If you were born between 1943 and 1954, full retirement age is 66
- If you were born between 1955 and 1959, full retirement age is between 66 and 67, depending on your birth year
- If you were born after 1960, full retirement age is 67
The Social Security website provides a calculator to help individuals understand how much their benefit will be reduced if they collect early. For example, if you were born in 1960 and wanted to collect as soon as you hit age 62, you’d receive 70% of your full retirement age payout. But if you waited until age 64 you’d get 80% of the full benefit.
By delaying the receipt of your benefits past full retirement age, you’ll earn even more than the full benefit for every year after full retirement age and before you hit age 70, you’ll collect 8% more each year.
- If you’re full retirement age is 66, you can earn up to 132% of your full benefit by waiting until you’re 70
- If you’re full retirement age is 67, you can earn up to 124% of your full benefit by waiting until you’re 70
What Is The Lowest Amount Of Social Security You Can Receive
Imagine that an individual who attained full retirement age at 67 had enough years of coverage to qualify for the full minimum Social Security benefit of $897. If they filed at 62, there would be a 30% reduction to benefits. This means that for 2020, the minimum Social Security benefit at 62 is $628.
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Benefits Available To Children & Parents
Eligible spouses arent the only ones that can receive Social Security survivor benefits. Dependent children and parents may also be entitled.
If you want to learn more, here are the best resources on the topic:
Social Security Benefits for Dependent Parents -Article by Mike Piper, the author of Social Security Made Simple.
How To Claim Survivors Benefits
To begin receiving survivors benefits, you must make a claim with the Social Security Administration. Survivors benefits claims may not be made online. You can start the claims process over the telephone, 1-800-772-1213, or go to your local Social Security office. Making an appointment may reduce your wait time.
The death should be reported to the Social Security Administration as soon as possible. In many cases, the funeral home can make that notification. You will have to provide the funeral home with the deceaseds Social Security number.
Do Survivor Benefits Increase After Full Retirement Age
If you are the surviving spouse who is claiming benefits based on your deceased partner’s work record, there is no benefit to waiting until after FRA to claim your benefits. You do not earn delayed retirement credits, so your benefit will not increase.
However, if you are the higher-earning spouse, delaying your claim for benefits until after FRA can result in your widow receiving more monthly income, as your widowed partner will receive the higher of the two monthly benefits you were each receiving.
Can A Person Who Has Never Worked Collect Social Security
Social Security benefits can have an enormous impact on your retirement. Fortunately, you may be eligible for Social Security even if you haven’t worked long enough to qualify for your own benefits. By taking advantage of any of these types of benefits, you can boost your retirement income with little to no effort.
What Social Security Strategy Is Right For Me
So, given the effects of your income and your age on your Social Security Benefits, at what age should you file for Social Security? Should you file at age 62, or at your FRA which could be, say age 66?
At 62, lets say youll receive $1,500 a month from Social Security. If you wait until your FRA at, say 66, you can make $2,000. Theres a $500 difference in benefits between those two ages.
Exactly how much money would you miss out on if you wait until age 66, and dont file at age 62?
Take that $1,500 per month, which adds up to $18,000 per year, and multiply it by the four years between ages 62 and 66: thats $72,000 that you wont receive if you wait to file until reaching your Full Retirement Age.
But you also need to remember: if you file early for social security, even though the penalizations will stop once you reach your FRA, you still wont be earning as much month to month as somebody who waited until age 66 or age 70. After 12 years of receiving their benefits, they will have earned back that $72,000 that you got early and after that, their benefits will only increase in comparison to yours.
This is why its important for you to sit down with somebody one-on-one and map this out. Ask yourself, How long do people in my family live? And will I live to that age?
These arent easy questions to think through but its important to plan ahead. Fortunately, you dont have to do any of this alone.