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How Much Social Security Can I Draw

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Your Social Security Full Retirement Age Plays A Big Role Know It

Social Security – How much can I expect to receive

First things first:Determine your Social Security full retirement age. For people born between 1943 and 1954, full retirement age is 66. It gradually climbs toward 67 if your birthday falls between 1955 and 1959. For those born in 1960 or later, full retirement age is 67.

You can claim your Social Security benefits a few years before or after your full retirement age, and your monthly benefit amount will vary as a result. More on that in a moment.

What If I Continue Working In My 60s

Many people whose health allows them to continue working in their 60s and beyond find that staying in the workforce keeps them young and gives them a sense of purpose. If this sounds like something youâd like to do, know that working after claiming early benefits may affect the amount you receive from Social Security. Why? Because the Social Security Administration wants to spread out your earnings so you donât outlive them. If you claim Social Security benefits early and then continue working, youâll be subject to whatâs called the Retirement Earnings Test.

If youâre between age 62 and your full retirement age, and youâre claiming benefits, you need to know about the Earnings Test Exempt Amount, a threshold that changes yearly. For 2021, the Retirement Earnings Test Exempt Amount is $18,960/year . If youâre in this age group and claiming benefits, then every $2 you make above the Exempt Amount will reduce by $1 the Social Security benefits you’ll receive.

Contrary to popular belief, this money doesnât disappear. It gets credited back to you – with interest – in the form of higher future benefits. You may hear people grumbling about the Social Security âEarnings Taxâ, but itâs not really a tax. Itâs a deferment of your benefits designed to keep you from spending too much too soon. And after you hit your full retirement age, you can work to your heartâs content without any reduction in your benefits.

How Can You Maximize Your Own Benefits

For most older Americans thinking about claiming Social Security benefits, it’s too late to change your earnings record or to go back and earn more every year. But you can control both of the other two factors on this list you can make sure you’ve worked for at least 35 years prior to claiming benefits, and you can wait until 70 to claim them. Both of these steps can mean getting larger benefits, which can provide you with more financial security in your later years.

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The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.

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Recommended Reading: Can You Receive Medicare Without Receiving Social Security Benefits

Do You Get The Money Back

You will be repaid your money once you reach full retirement age. At that time, Social Security recalculates your benefit and gives you credit for the months that benefits were withheld. But remember that if you took benefits prior to full retirement age, your check will not be as large as it would have been if you had waited.

How To Receive Federal Benefits

How Much Can I Earn While Drawing Social Security ...

To begin receiving your federal benefits, like Social Security or veterans benefits, you must sign up for electronic payments with direct deposit.

If You Have a Bank or Credit Union Account:;

  • Call the Go Direct Helpline at .

If You Don’t have a Bank or Credit Union Account:;

Make Changes to an Existing Direct Deposit Account:

Learn how to make changes to an existing direct deposit account. You also may contact the federal agency that pays your benefit for help with your enrollment.

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.

Why It’s A Good Idea To Claim Social Security Before 70 To Allow A Higher Earner To Delay

There are several reasons it makes sense to start your benefit long before 70 to enable a higher-earning spouse to delay.

  • Delaying a higher benefit has a bigger payoff

Early filing penalties and delayed retirement credits are both applied on a percentage basis. That means the larger your benefit, the bigger the impact of early or late filing.

Say your standard benefit is $800 per month and your spouse’s standard benefit is $1,700 per month.

  • If you claim early and are subject to a 25% early filing penalty, your benefit shrinks by $200 per month.
  • If your spouse claimed early, that same 25% penalty would result in a $425 benefit reduction.;

Likewise, delayed retirement credits applicable after hitting full retirement age are;also applied on a percentage basis.

If you pass up the opportunity to earn a 24% benefit boost, you give up the chance to raise your checks by $192. But your higher-earning spouse gives up the chance to earn a $408 boost.;

  • You can maximize your survivor benefits

When one spouse dies, the surviving spouse gets to keep the higher of the two benefits. It pays off to enable your higher-earning spouse to put off claiming their checks to raise their benefits — even if that means claiming yours early.

  • Your benefits could go up later

But you can start getting your own;checks to help support both of you. Then, when your spouse does file and you become eligible for spousal benefits, you can switch to them if it makes financial sense.;

Financial Benefits Of Working Longer

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.

Your Monthly Social Security Benefits Grow The Longer You Wait To Claim

Can I Collect Social Security While Working?

You can collect Social Security benefits as soon as you turn 62, but taking benefits before your full retirement age results in a permanent benefits reduction of as much as 25% to 30%, depending on your full retirement age.

If you wait until you hit full retirement age to claim Social Security benefits, youll receive 100% of your earned benefits. Or you can keep waiting to claim your Social Security benefits all the way to age 70. There’s a big bonus to delaying your claim — your monthly Social Security benefit will grow by 8% a year until age 70. Any cost-of-living adjustments will be included, too, so you don’t forgo those by waiting.

Waiting to claim your Social Security benefits can benefit your heirs as well. By waiting to take his benefit, a high-earning husband, for example, can ensure that his low-earning wife will receive a much higher survivor benefit in the event he dies before her. That extra income of up to 32% could make a big difference for a widow whose household is down to one Social Security benefit.

You Can Claim Social Security Benefits Earned By Your Ex

Just because you’re divorced doesn’t mean you’ve lost the ability to get a Social Security benefit based on your former spouse’s earnings record. You can receive a benefit based on his or her record instead of a benefit based on your own work record if you were married at least 10 years, you are 62 or older, and single.

Like a regular spousal benefit, you can get up to 50% of an ex-spouse’s benefit — less if you claim before full retirement age. And the beauty of it is that your ex never needs to know because you apply for the benefit directly through the Social Security Administration. Taking a benefit on your ex’s record has no effect on his or her benefit or the benefit of your ex’s new spouse. And unlike a regular spousal benefit, if your ex qualifies for benefits but has yet to apply, you can still take a benefit on the ex’s record if you have been divorced for at least two years.

Note: Ex-spouses can also take a survivor benefit if their ex has died after the divorce, and, like any survivor benefit, it will be worth up to 100% of what the ex-spouse received. If you remarry after age 60, you are still eligible for the survivor benefit.

A claiming strategy if youre divorced: Exes at full retirement age who were born on January 1, 1954, or earlier can apply to restrict their application to a spousal benefit while letting their own benefit grow.

State Taxes On Social Security Benefits

Everything weve discussed above is about your federal income taxes. Depending on where you live, you may also have to pay state income taxes.

There are 13 states that collect taxes on at least some Social Security income. Four of those states; follow the same taxation rules as the federal government. So if you live in one of those four states then you will pay the states regular income tax rates on all of your taxable benefits .

The other nine states also follow the federal rules but offer deductions or exemptions based on your age or income. So in those nine states, you likely wont pay tax on the full taxable amount.

The other 37 states do not tax Social Security income.

State Taxes on Social Security Benefits
Taxed According to Federal RulesMinnesota, North Dakota, Vermont, West Virginia
Partially TaxedColorado, Connecticut, Kansas, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah
No State Tax on Social Security BenefitsAlabama, Alaska, Arizona, Arkansas, California, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Nevada, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, Washington, Wisconsin, Wyoming

How Is Social Security Calculated

To determine your monthly benefits, the Social Security Administration uses a series of somewhat complicated calculations. At their heart is an inflation-adjusted average of your monthly income from your highest earning years.

This monthly average is run through an income replacement formula that determines your base monthly Social Security payment rate in retirement. This base rate will then be adjusted upward or downward depending on a few factors, like your age when you start claiming Social Security benefits, your employment status in retirement, your tax bracket and your Medicare premiums.

If that sounds overly complex, dont fret. Heres how each part of the Social Security calculation breaks down.

Chapter 3: How Are Social Security Survivor Benefits Calculated

Over 7 Best Pics How Much Can I Earn while Drawing social ...

When a worker pays into the Social Security system over the course of their life, they accumulate credits. A worker can receive up to four credits a year. For example, in 2020, workers will receive one credit for every $1,410 they earn. When your spouse has earned $5,640, they have earned their four credits for the year.

In order to claim retirement, a worker needs 40 credits. However, the number of credits required to provide survivor benefits for the workers family depends on the workers age when they die. This means that the younger a person is when they pass away, the fewer credits they will need for their family members receive survivor benefits.

When someone retires, or when they die, the amount of their benefit is calculated based on their earnings over their lifetime. This is the amount that survivors will receive all or part of. To calculate their benefit, Social Security adds up the workers income during the years they made the most money. They then index that total against average wages across the country during those years. This results in the workers;Average Indexed Monthly Earnings . The Social Security Administration only includes the portion of a workers income up to the maximum taxable earnings limit. This is the amount that is;taxed for Social Securityin 2020, thats $137,700. If your spouse earned more than that, the higher earnings will not be included in the calculation because these monies were not taxed by Social Security.

Did you Know?

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.

Claiming Early Or Late

Your spousal benefit is based upon your partner’s “normal” benefit amount. But the amount you receive will depend upon when you begin to claim it.

You can claim spousal benefits as early as age 62, but you won’t receive as much as if you wait until your own full retirement age. For example, if your full retirement age is 67 and you choose to claim spousal benefits at 62, you’d receive a benefit that’s equal to 32.5% of your spouse’s full benefit amount.

The amount increases with each year you delay. At your full retirement age you’d be eligible for the maximum, which is 50% of your spouse’s full benefit.

Notably, spousal benefits are not reduced if the spouse is caring for a child who qualifies under the age or disability rules. Spousal benefits can never exceed 50% of the other spouses full benefit. So, there is no incentive to file for spousal benefits later than your own full retirement age.

An ex-spouse may be eligible for spousal benefits even if the former spouse hasn’t retired yet.

Spouses And Social Security

You can claim Social Security benefits based on your spouse’s work record. If claiming spousal benefits provides more, claiming before your FRA on a spouse’s record means you’ll lose even more than claiming on your own recordthe benefit reduction for a spouse is up to 35% while the reduction for claiming your own benefit is up to 30%. For instance, if you’re the spouse of Colleen in the above example and you are the same age, you’d be eligible for only $650 a month at age 6235% less than the $1000 a month you would get at your FRA of 67.

Not married? Read Viewpoints on Fidelity.com: Social Security tips for singles

Your decision to take benefits early could outlive you. If you were to die before your spouse, they would be eligible to receive your monthly amount as a survivor benefitif it’s higher than their own amount. But if you take your benefits early, say at age 62 versus waiting until age 70, your spouse’s survivor Social Security benefit could be up to 30% less for the remainder of their lifetime.

Get Your Social Security Estimates

ð´ Earnings Limits If I Work and Collect Social Security

The SSA website provides estimates for how much you’ll collect if you start receiving benefits at age 62, your full retirement age , and age 70. Remember that you don’t have to start taking your benefits at those milestone ages; you and your spouse can start collecting anytime between ages 62 and 70.

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