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How Old Before You Can Collect Social Security

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

Can I collect Social Security Retirement and Social Security Disability?

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.;

How Your Social Security Benefits Are Earned

To be eligible for Social Security benefits in retirement, you must earn at least 40 “credits” throughout your career. You can earn as many as four credits a year, so it takes 10 years of work to qualify for Social Security.

In 2021, you must earn $1,470 to get one Social Security work credit and $5,880 to get the maximum four credits for the year.

Whats Full Retirement Age

Full retirement age is when youre eligible to receive full Social Security benefits. Your full retirement age depends on your birth year: Under current law, if you were born in 1951 or later, your full retirement age is now some point after age 65all the way up to age 67 for those born after 1959. If you were born before 1951, youve already reached age 66 and full retirement age.

Retirement ages for full Social Security benefits;

If you were born in

Your full retirement age is

1950 or earlier

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The Problem: The Economic Toll From The Pandemic Will Very Likely Affect Social Security Benefits

The initial retirement benefits that Social Security beneficiaries receive in the first year of retirement are determined by a formula that depends, in part, on the growth of average wages in the economy. Due to the economic fallout from the COVID-19 pandemic, the key measure of average wagesthe average wage index is very likely to decline in 2020. As a result, the initial retirement benefits for those who are first eligible to receive benefits in 2022when they reach the age of 62would be significantly less than what was anticipated only months ago, before the pandemic began to exact its economic toll. The effect is very likely to be so significant that workers turning 62 in 2022 would receive initial retirement benefits that are less than those of workers who were born a year earlier and who had essentially the same earnings history. This incongruity is what Social Security experts call a benefit notch. Such a notch would be unfair to the beneficiaries who turn 60 in 2020 and first become eligible to retire in 2022 because benefits are normally expected to grow for each successive cohort of retirees. Moreover, the benefit reduction and notch would have long-lasting consequences, as they not only would affect benefits in the first year of ones retirement but also lower them for every year going forward, as annual benefits are determined by adjusting the initial level for inflation.

Congress Must Act Sooner Rather Than Later

How Do You Apply for Social Security at Age 62?

In theory, the AWI problem could be fixed anytime before 2022, when, for example, workers who turn 60 this year are first eligible to retire at the age of 62. But that delay would cause significant anxiety for these workers, whose future benefits would be at risk. Moreover, people decide when to retire based on projections of their incomes in their initial year of retirement and in the remainder of their lives. It would be most unfair to workers decision-making processes to have the expectations of their future incomes be uncertain for some period of time while they are trying to make such an important decision.

Congress needs to act sooner rather than later to ameliorate this problem. One possibility would be to include a fix in the stimulus legislation to cope with the economic effects of the COVID-19 pandemic that Congress is currently considering.

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How The Earnings Limit Is Applied

The most confusing part of the benefit reduction due to income is how its reflected in your monthly benefits deposits. Instead of taking out a little bit every month, the SSA will withhold several months of benefits at a time.

If you predict in advance that you will have excess earnings and report this to the Social Security Administration, they may take a few months of benefits before you actually earn the anticipated excess earnings.

For example, if your Social Security payment is $1,667 per month, and you expect to receive $28,960 in wages from your job, the Administration would calculate that youll be over your earnings limit by $10,000 and thus $5,000 in benefits should be withheld. So, they would withhold your benefit payment from January to March. In April, your checks would resume.;

If you dont report excess income before you earn it, then you have to report this information after the fact. You can do this when you file your income tax return, but the preferred method is to be proactive and call your local Social Security Administration office.

If you wait for the Social Security Administration to learn of your excess earnings via your tax return, there could be a significant gap between the time you earn the excess income and the time that they withhold your benefits. In most cases, its better to report the excess earnings quickly so the benefits reduction occurs closer to the time you actually earn that extra income.

How To Stop Social Security Check Payments

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.

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Reasons It Can Be Good

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.

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.;

How Will Working Affect Social Security Benefits

Can I Collect Social Security Retirement and Social Security Disability?

In a recent survey, 68% of current workers stated they plan to work for pay after retiring.1

And that possibility raises an interesting question: how will working affect Social Security benefits?

The answer to that question requires an understanding of three key concepts: full retirement age, the earnings test, and taxable benefits.

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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.

Watch Out For Hidden Costs

Youll also want to consider other lifestyle factors, especially Medicare. Americans become eligible for federal health insurance coverage at age 65, well after when you can begin to file for Social Security.

If you stop working at age 62 and lose health insurance, you have to get supplemental insurance to bridge the gap until you turn 65 and Medicare kicks in, Neiser says.

If you work during retirement, you have another incentive to delay collecting Social Security. Earning too much at a job after you begin collecting your benefit can reduce your payout, but only if you have yet to hit full retirement age.

However, when you hit full retirement age, your benefit will increase to account for any benefit that was withheld earlier due to working. Heres how much you can earn and not get hit.

If youre younger than full retirement age for all of 2021, the Social Security Administration will deduct $1 of your monthly check for every $2 you earn above $18,960 per year.

If you reach full retirement age in 2021, the administration deducts $1 of your monthly check for every $3 you earn above $50,520 until the month you reach retirement age.

Youll also owe Social Security and Medicare tax on your earnings, even if youre already receiving benefits.

So those are some potential pitfalls to claiming Social Security early.

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Before You Make Your Decision

There are advantages and disadvantages to taking your benefit before your full retirement age. The advantage is that you collect benefits for a longer period of time. The disadvantage is your benefit will be reduced. Each person’s situation is different. It is important to remember:

  • If you delay your benefits until after full retirement age, you will be eligible for delayed retirement credits that would increase your monthly benefit.
  • That there are other things to consider when making the decision about when to begin receiving your retirement benefits.

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Spouses Who Dont Qualify For Their Own Social Security

Can I work and collect 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.

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You’re Afraid Social Security Will End

Social Security is one of those benefits that’s supposed to be around forever. But the system is in trouble, and benefits may change in the future. That worries people of all ages.

While older peopleparticularly ones in or nearing retirement ageworry about the fate of Social Security, they likely won’t see much impact. Still, if the thought of losing out on Social Security benefits is keeping you up at night, it may be better to start claiming early or at full retirement age rather than to hold off for an increased benefit.

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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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.

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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.

The Source Ofand Solution Tothe Problem

Why retire and collect social security at 62?

When the current Social Security formula was put in place in 1977, no provision was made for the contingency that economic conditions would be so dire that average wages would fall in any given year. This problem first surfaced in 2009 during the Great Recession. The AWI, however, fell by a relatively small amount, and policymakers chose not to do anything about it. As a result of the COVID-19 pandemic, however, the decline in the AWI is likely to be about four times as big now as it was during the Great Recession.

There is ample precedent for fixing this problem. The first precedent concerns Social Security cost-of-living allowances . As mentioned above, payments in years after beneficiaries first year of retirement are indexed to inflation using a version of the consumer price index . However, under the law, if prices fall in any year, benefits are not adjusted downward; rather, they remain the same. The second precedent concerns the Social Security contribution and benefit base, also known as the taxable maximum. The taxable maximum is the dollar amount of annual earnings above which the Social Security payroll tax does not apply. The taxable maximum is indexed to the AWIbut like COLAs, it is never adjusted downward.

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Who Should Delay Benefits

If you are married and the higher wage earner, it generally makes sense for you to wait as long as possible to claim.

One reason for that is Social Security payments are based on mortality tables that have not been updated since 1983. And life expectancies have increased since that time.

People are living longer than they would have been expected to back in 1983, and therefore the credits that you get for delaying Social Security are worth more to you than they would be if they were actuarially fair, Jones said.

Holding off until age 70 makes sense particularly for the higher earner of a married couple because their benefits will in turn determine spousal and survivor benefits for their significant other.

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