Monday, May 16, 2022

How Much Social Security At 62

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Does Your Social Security Benefit Increase If You Continue Working

ð´How Much Social Security $40,000 Income Retire 62 2021

Your benefits may increase when you work: As long as you continue to work, even if you are receiving benefits, you will continue to pay Social Security taxes on your earnings. However, we will check your record every year to see whether the additional earnings you had will increase your monthly benefit.

What To Consider When Retiring At 62

If you’re set on retiring at age 62, there are a few important questions to ask yourself first. Here are some of the most important things to weigh in the balance:

  • How much money you’ll need to cover your monthly expenses

  • How much income you can expect from a 401, individual retirement account, pension, taxable investments and cash savings

  • What kind of lifestyle you’d like to have in retirement

  • Whether you’ll continue working on a part-time basis or start a side hustle or business

  • How you’ll pay for medical expenses until you become eligible for Medicare

  • Your overall health and anticipated life expectancy

  • What you have for long-term care and life insurance coverage

  • Whether you’re interested in leaving a financial legacy for children, other loved ones or a charity

The goal is to get a sense of how financially prepared you are to retire at age 62 and whether your plan is achievable, based on how much you’ll have saved and what you expect to need.

Fact #: Social Security Is More Than Just A Retirement Program It Provides Important Life Insurance And Disability Insurance Protection As Well

Over 64 million people, or more than 1 in every 6 U.S. residents, collected Social Security benefits in June 2020. While older Americans make up about 4 in 5 beneficiaries, another one-fifth of beneficiaries received Social Security Disability Insurance or were young survivors of deceased workers.

In addition to Social Securitys retirement benefits, workers earn life insurance and SSDI protection by making Social Security payroll tax contributions:

  • About 96 percent of people aged 20-49 who worked in jobs covered by Social Security in 2019 have earned life insurance protection through Social Security.
  • For a young worker with average earnings, a spouse, and two children, thats equivalent to a life insurance policy with a face value of over $725,000 in 2018, according to Social Securitys actuaries.
  • About 89 percent of people aged 21-64 who worked in covered employment in 2019 are insured through Social Security in case of severe disability.

The risk of disability or premature death is greater than many realize. Some 6 percent of recent entrants to the labor force will die before reaching the full retirement age, and many more will become disabled.

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Maximum Social Security Benefits Example

Say that someone who turned 62 in 2021 will reach FRA at 66 years and 10 months, with earnings that make them eligible at that point for a monthly benefit of $1,000. Opting to receive benefits at age 62 will reduce their monthly benefit by 29.2% to $708 to account for the longer time they could receive benefits, according to the Social Security Administration . That decrease is usually permanent.

If that same person waits to get benefits until age 70, their monthly benefit increases to $1,253. The larger amount is due to the delayed retirement credits earned for the decision to postpone receiving benefits past FRA. In this example, that higher amount at age 70 is about 77% more than the benefit they would receive each month if benefits started at age 62, or a difference of $545 each month.

Of course, the best time for someone to start taking Social Security benefits depends on a variety of factors, not just the dollar amount of the benefit. Things such as current income and employment status, other available retirement funds, and life expectancy must also be factored into the decision.

The Social Security Administration has several calculators to help you estimate your benefits.

Your Health Is In Bad Shape

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Social Security is supposed to pay you the same lifetime total regardless of when you initially claim benefits. Here’s the logic: Filing early will reduce your benefits on a monthly basis, but you’ll collect a larger number of individual payments. Filing at FRA means you’ll get your full benefit, but fewer individual payments.

Things should even out if you live an average lifespan. If you pass away sooner than the typical senior, you could lose out on lifetime Social Security income by waiting to file.

Imagine you’re entitled to $1,500 a month in benefits at your FRA of 67. Filing at 62 will reduce each payment you get to $1,050, but you’ll collect 60 more payments. You’ll break even in both filing scenarios if you live just past 78 1/2. If you pass away at 72, you’ll come out $36,000 ahead in your lifetime by virtue of having filed early.

That’s why your health should be a major factor in determining when you claim benefits. If it’s poor, and you’re unlikely to live a long life, filing for Social Security at the earliest possible age of 62 often makes sense.

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How Much Could You Get

The vast majority of American workers won’t qualify for the maximum benefit, so a better question to ask is “How much could I get at 62?”

Let’s start with your projected Social Security benefit at full retirement age, also known as your primary insurance amount, or PIA. This amount is determined by taking your 35 highest-earning years, indexed for inflation, and computing your monthly average earnings. This monthly average is then applied to a formula. As of 2016, the formula is:

  • 90% of the first $856
  • 32% of the amount greater than $856 but less than or equal to $5,157
  • 15% of the amount greater than $5,157

If you know how much your earnings were throughout your career , the Social Security Administration has a worksheetyou can use to estimate your PIA. Or better yet, you can find this information on your annual Social Security statement.

This amount is then adjusted based on the age at which the individual claims their benefits. For people born in 1954 or earlier, full retirement age is 66 years old. Two months are added to full retirement age for each year the individual was born after 1954, until 1960. American workers born in 1960 or later have a full retirement age of 67.

For claiming Social Security before full retirement age, benefits are reduced by the following percentages:

  • 6-2/3% per year for the first three years, or 5/9% per month, up to 36 months early
  • 5% per year beyond three years, or 5/12% per month beyond 36 months early, as early as age 62.

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.

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How The Length Of Your Career Affects Your Benefits

One of the most important factors when it comes to your benefit amount is the number of years you’ve worked. Most people become eligible for Social Security retirement benefits once they’ve earned income for 10 years, but you’ll need to work for at least 35 years to receive the maximum benefit amount.

When calculating the amount you’ll receive, the Social Security Administration takes an average of your wages throughout the 35 highest-earning years of your career. That number is then adjusted for inflation, and the result is the amount you’ll collect if you claim at your full retirement age .

If you work more than 35 years, only the years with the highest earnings will be counted — which could increase your average and result in a higher benefit amount. If you work fewer than 35 years, however, you’ll have zeros added to the equation, which will bring down your average.

How Much Will I Get From Social Security

Collecting Social Security at 62 How They Feel About It Now

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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Reasons Not To Take Social Security At Age 62

One reason to delay your benefits is that Social Security will withhold part of your benefits if you earn more than the annual Social Security earnings limit. This only applies before your full retirement age of 66 or 67. A portion of your Social Security benefit is withheld and slowly paid back to you after you reach your full retirement age.

As of 2022, during the year you reach full retirement age, the Social Security Administration withholds $1 from your benefits for every $3 you earn above $51,960.

There is no reason to wait until you’re past the age of 70 to begin drawing Social Security.

In the years before you reach the year you turn full retirement age, the SSA withholds $1 for every $2 you earn above $19,560 .

You may also want to wait if you’re single, have little saved for retirement, and have a longer life expectancy. In this situation, you should consider working as long as possible to maximize your benefits then, wait as long as you can to begin your benefits, since you don’t have other retirement accounts to draw on.

If your spouse still works and has earned income, a larger portion of your Social Security benefits will be taxed if you start before your full retirement age.

Another consideration is if you’re married, your spouse’s benefit might be smaller than yours, and/or your spouse is much younger than you. When married, your combined life expectancy will be longer than either of yours as a single person.

Heres How Working After 62 Can Change Your Social Security Benefits

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    Continuing to work after age 62 can affect your level of Social Security retirement benefits, whether you are receiving benefits at the time or not. Knowing how continuing to work might change benefit levels can lead to better decisions about when to claim benefits and whether to continue working.

    You can begin claiming Social Security retirement benefits as early as age 62, whether you are working or not. You know that the level of benefits increases for each year you wait to claim them through age 70. Theres no benefit for delaying claiming past age 70. In addition, the level of benefits might increase if you continue working after 62, whether you claim benefits at 62 or later.

    Social Security retirement benefits are calculated using your 35 highest-earning years. If you dont have 35 years of earnings, youll be assigned an income of $0 for each of the missing years. After you turn 62, Social Security recalculates your benefits every year that you dont claim benefits. It will take your earnings for the latest year, add that to your record of lifetime earnings and select the 35 years with the highest inflation-adjusted earnings. Those are the only details of how benefits are calculated you need for this discussion.

    When claim Social Security retirement benefits and continue to work, the effects are more complicated.

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    What Is Full Retirement Age

    The size of your monthly Social Security benefit depends on a few factors, including how much you earned over the years, the year you were born, and the age when you start claimingdown to the month.

    Youll receive your full monthly benefit if you start claiming when you reach what Social Security considers your full retirement age , sometimes also referred to as normal retirement age. FRA was 65 when Social Security began, but it has been raised to 67 for anyone born in 1960 or later. To find your FRA, see the chart below.

    Finding Your Full Retirement Age
    67

    What Happens If You Claim After Your Fra

    When to Take Social Security Retirement Benefits

    If you wait until your age 70 to start claiming benefits, then youll get an extra 8% per yearor, in total, 132% of your primary insurance amount for the rest of your life. Claiming after you turn 70 doesnt increase your benefits further, so theres no reason to wait longer than that.

    The longer you can afford to wait after age 62 , the larger your monthly benefit will be. Nevertheless, delaying benefits doesnt necessarily mean that youll come out ahead overall. Other factors should be considered, including your expected longevity and whether you plan to file for spousal benefits. You should also consider the tax, investment opportunity, and health coverage implications.

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    Can You Take Social Security At 62 And Then Stop

    Yes. If you have reached full retirement age but you are not yet 70, you can apply for a suspension of your old-age pension.

    Can I stop taking my Social Security and restart later?

    Principle If the starting date or age of your benefits allows it, you can stop paying social security benefits. You can re-apply for or restart your payments later to maximize or minimize your charges.

    Can I stop working at 62 and collect SS at 67?

    Absolutely not. You can stop and start working whenever you want. And you can start social security at any time between the ages of 62 and 70.

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    How Much Do You Have To Earn To Get Maximum Social Security

    In recent years, you have to earn a six figure salary to get a Social Security overpayment. The maximum wage taxable at Social Security in 2021 is $ 142,800. The exact amount, however, varies each year and increases over time. It was $ 137,700 in 2020 and $ 106,800 in 2010.

    How much will my Social Security be if I make 75000 a year?

    If you earn $ 75,000 a year, you can expect to receive $ 2,358 a month or about $ 28,300 a year from Social Security.

    How much Social Security will I get if I earn 40000?

    Those who make $ 40,000 pay taxes on all their income into the Social Security system. It takes more than three times that amount to maximize your Social Security payroll taxes. The current tax rate is 6.2%, so you can expect to see $ 2,480 going straight from your paycheck towards Social Security.

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    Youre Only Working Part Time

    If you claim Social Security prior to your full retirement age while still holding down a part-time job, you might have your benefits reduced if your work income exceeds the annual limit. For 2021, if you are under full retirement age, your benefits go down by $1 for every $2 your income exceeds $18,960. If you reach full retirement age in 2021, your benefits go down by $1 for every $3 your income exceeds $50,520 prior to reaching full retirement age. If youre working part-time to help make ends meet, taking Social Security at 62 might make sense.

    When Can I Start Collecting Social Security

    Can You Take Social Security at 62 and Still Work Retirement Question

    The minimum age to claim benefits is 62. If you are turning 62 and need the income from Social Security to support yourself, then you can start claiming your benefits now. However, if you have enough other income to keep you going until you are older, you may want to delay increasing the size of your monthly benefit.

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    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 spouses age. A disabled child can receive 75% of your benefits each month even after youre 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.

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