Younger Spouses And Children Of Those Receiving Retirement Benefits
In very limited circumstances, benefits are available to spouses and children after a worker claims retirement benefits, even when those family members are younger than age 62. In order to qualify, the following requirements must be met:
Children can receive benefits if they’re under age 18, still in high school and 19 or younger, or disabled.
Spouses can receive benefits before age 62 as long as they’re caring for a child under age 16 who’s receiving Social Security benefits on the worker’s earnings history.
Only about 670,000 children receive benefits in this manner. Although a larger number of spouses get spousal benefits, most of them are at least 62 years old.
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.;
Whats Your Social Security Break
If youre looking to maximize your total lifetime Social Security payout, youll want to conduct a break-even analysis to determine when you should start drawing your benefits.
Your break-even age occurs when the total value of higher benefits starts to exceed the total value of lower benefits .
For example, if you are eligible to collect a reduced $900 benefit at age 62 plus 1 month, and your benefit would increase to $1,251 at age 65 and 10 months, your estimated break-even age is 75 years and 5 months.
If you expect to live beyond that age, it could make financial sense to delay drawing benefits. The Social Security Administrations life expectancy calculator can help you decide.
When it comes to calculating a start date for Social Security benefits, however, theres not an age thats appropriate for everyone. Consider your own financial needs, health and other retirement plans before making the call. If you cant reasonably afford to live without taking benefits, it may make little sense to delay taking your benefit.
When Should You Start Social Security
The Social Security Administration does not have a recommended age to start receiving benefits. The decision is entirely up to you. You’ll get a little bit less if you start early, or a bigger benefit if you wait until 70. You can calculate the difference on the SSA website.;You may receive a bigger payout over your lifetime if you wait, but that might not be as important as receiving income now, especially if you can no longer work for health reasons. Ultimately, the right age depends on your financial situation, your work, and your health.
When Should I Apply
If you were not selected for automatic enrollment, and if you want to start receiving your OAS pension, you should apply at least six months before your 65th birthday.
If you are already 65 and want to start receiving the OAS pension, send your application as soon as possible so you wont lose any payments.
If you are applying for your OAS pension after you turn 65, and you do not want to delay the receipt of your pension, we will give you a retroactive payment for up to 12 months. You may be eligible for retroactive payments covering a longer period if, due to a medical condition, you can show that you were unable to apply earlier or to ask someone to apply on your behalf. If you are sentenced for two years or more in a federal prison you may still apply for your OAS pension. However, you will not receive pension payments while you are serving your sentence. You must notify Service Canada in writing of your release and your OAS pension payments will begin the month of your release.
For more information, visit Old Age Security.
The Ultimate Guide To Social Security Survivor Benefits
When a loved one dies, the financial fallout to deal with often adds to your grief. In some circumstances, Social Security survivor benefits can fill part of that void. As of June 2020, Social Security paid monthly survivor benefits to approximately 6 million people.
But navigating the maze of Social Security benefits can be confusing, especially when youre dealing with a loss. In this article, well cover how survivor benefits work, who qualifies and other commonly asked questions.
Should You Take Social Security At Full Retirement Age
There are tons of factors to consider in deciding when to start your Social Security benefits.
For people with serious health problems, it might make sense to start benefits early. Someone who was disabled before full retirement age and can no longer work might consider forgoing a higher monthly benefit to start collecting monthly Social Security benefits immediately. Meanwhile, maximizing Social Security benefits is a strategy thats most relevant for people who expect to live longer than average.
Consider a hypothetical beneficiary who lives to 79, which is the average American life expectancy:
; If they started collecting Social Security at age 62, with a $1,400 monthly payment, they would receive a lifetime total of $285,600 in benefits.
; If they waited until their full retirement age, theyd receive a $2,000 monthly benefit, for a lifetime total of $300,000.
; If they waited as long as possible to claim benefitsto age 70they would get a monthly benefit of $2,600, or a lifetime total of $280,000.
For this hypothetical American, no matter when they choose to start receiving Social Security benefits, the differences in lifetime total benefits isnt very large. Deciding when to start Social Security isnt always as simple as aiming to maximize your monthly payment.
Read Also: How Is Social Security Pension Calculated
What Is The Guaranteed Income Supplement
The GIS provides a monthly, non-taxable benefit to OAS pension recipients living in Canada who have a low income.
To be eligible to receive the GIS, you must be receiving the OAS pension. The amount you receive is based on your marital status and income.
To receive the GIS, your annual income must be below a specific amount.
For the most up-to-date benefit amounts, visit Old Age Security payment amounts. To find out if you or your spouse qualifies for the Allowance or the Allowance for the Survivor, or for more information on these benefits, visit Allowance for people aged 60 to 64 or contact us.
How And When To Apply For Social Security Retirement Benefits
Dear Savvy Senior,
What is the easiest way to apply for my Social Security retirement benefits, and how far in advance do I need to apply before I start collecting?
The Social Security Administration offers three different ways you can apply for your retirement and/or spouses benefits, depending on your preference and how much help you need. Heres a rundown of the options, along with a list of information youll need to apply, and when to fill out the application.
Recommended Reading: What Can Someone Use Your Social Security Number For
How The Ssa Calculates Benefits
For an in-depth look at how the government reaches these numbers, see our article on How Social Security Is Calculated. The quick-and-dirty, however, is that the program is based on AIME, or “Average Indexed Monthly Earnings.”
To calculate this, the government takes the highest-earning 35 years of your working life, caps them at the maximum taxable income for FICA taxes and averages them together to create a representative annual income. It divides by 12 to get a monthly income, which is the AIME.
The government then runs your AIME through a three-tiered formula to calculate your Primary Insurance Amount . The formula always uses the same percentages, but the specific cutoffs change from year to year. At time of writing the PIA formula is:
- 90% of AIME up to the first $960,
- 32% of AIME greater than $960, less than $5,785, and
- 15% of AIME greater than $5,785.
So if you earned $60,000 per year for your entire life and turned 62 in 2020, you would have an AIME of $5,000. The Social Security Administration would calculate your benefits as follows:
- 90% of AIME up to the first $960: 0.9 x 895 = 864
- 32% of AIME between $960 and $5,785: .32 x 4,040 = 1,292.80
- 15% of AIME greater than $5,785: .15 x 0 = 0
- You would collect $2,156.80 per month in benefits.
Claiming Social Security Early Reduces Benefits
You can claim your Social Security retirement benefits as early as 62 but you will receive a smaller amount if you do that. How much your benefits will be reduced depends on your age when you claim Social Security. For example, lets say you are eligible for 100% of your benefits at age 67, which is the full retirement age for anyone born in or after 1960:;
- If you claim Social Security early at age 62, your benefit will be reduced by 30%
- If you claim early at age 63, your benefit will be reduced by 25%
- If you claim early at age 64, your benefit will be reduced by 20%
- If you claim early at age 65, your benefit will be reduced by 13.3%
- If you claim early at age 66, your benefit will be reduced by 6.7%
Under this example, if you were eligible for $1,000 a month at your full retirement age of 67 then the benefit would be reduced to $700 a month if you claimed at 62; $750 if you claimed at 63; and so on, according to the Social Security Administration. The reduction is calculated each month, not on a yearly basis, so every month you wait after age 62 will mean a slightly bigger Social Security check.;
- Social Security Basics: 12 Things You Must Know About Claiming and Maximizing Your Social Security Benefits
Provincial Territorial And Municipal Programs
Your provincial, territorial and municipal governments may offer income assistance and services to seniors. For more information, visit the Benefits Finder.
The Government of Canada provides information on retirement planning, including useful tools such as the Canadian Retirement Income Calculator.
How To Calculate The Cola For Social Security Benefits
The Bureau of Labor Statistics releases the consumer price index on a monthly basis; each update reflects numbers for the prior month. This is usually released about the middle of the month; Junes data, for example, will be released around July 15.
Now, it seems like it would make the most sense to simply take the aggregate value of the consumer price index on a year-over-year basis to see how much inflation changed from one year to the next.
But this is Social Security, and nothing is ever that simple. Instead, they only use the data from the third quarter of the year or the CPI reading from July, August, and September.
From there, they compare those numbers to the prior years July, August, and September readings.
In other words, the way the comparison is made is by adding the data for the third quarter of the prior year, and the data for the third quarter of the current year, and then comparing the percentage difference between the numbers.;
If there is a positive change, the amount of change is the amount of COLA for Social Security benefits. If the numbers do not change, or go down, then benefits will not change for the following year. This has happened only a handful of times in recent history with the most recent being 2015.;;
Thats all there is to it. So if you want to get a head start on figuring out what the annual COLA will be on your Social Security income, you can start watching this number in August, when Julys CPI is released.;
The Social Security Cola: How Your Adjustment Is Calculated And Applied
If you are 62 or older,; ;youve probably noticed that in most years your Social Security benefits are increased with a cost of living adjustment.;
The cost-of-living adjustment, or Social Security COLA, increases your monthly benefit amount to help your income keep up with inflation. Without the COLA added to your payments, the purchasing power of your benefit would erode as the prices of the things you routinely buy increased over time.;
The annual Social Security COLA amount is normally announced in mid-October. Many people anxiously await the announcement to see how much that their benefit amount will increase in the coming year.;
If you await the announcement but feel like the process of coming up with each years COLA feels mysterious, I want to cover how the Social Security administration calculates these annual cost-of-living adjustments and then applies them to your benefit.;
That way, not only will you know how to look at the data for yourself and avoid a surprise when the announcement comes out, but youll also have a better grasp on what the increase means in terms of dollars to your benefit.;
Applying For Social Security
- ;;; Generally, you should apply for Social Security retirement benefits three months before you want your benefits to begin.; Even if you dont plan to receive benefits right away, you should still sign up for Medicare three months before you reach age 65.
- ;;; If you were born before 1938 and you meet all other requirements, you can receive benefits beginning with the first full month you are age 62.; However, if you choose to begin receiving benefits before age 65, your benefits will be reduced to account for the longer period over which you will be paid.
- ;;; The full retirement age is 65 for persons born before 1938.; The age gradually rises until it reaches 67 for persons born in 1960 or later.; Social Security benefits are payable at full retirement age for anyone with enough Social Security credits.; As you work and pay taxes, you earn credits that count towards eligibility for future Social Security benefits.; You can earn a maximum of four credits each year.; Most people need 40 credits to qualify for benefits.; People who delay retirement beyond full retirement age get special credit for each month they dont receive a benefit until they reach age 70.
- ;;; To find out what your retirement age is, use the Social Security Retirement Age Chart at www.ssa.gov
- ;;; You should speak with a Social Security representative in the year before you plan to retire.; It may be to your advantage to start receiving your retirement benefits before you actually stop working.
You’re Eligible For Disability Benefits
Disability benefits are available to workers of any age, as long as they’ve accumulated a long enough work history to claim them. The requirements for work history vary by age, but millions of workers qualify for disability benefits.
To qualify for disability benefits, you have to demonstrate that you’re unable to work for at least a year because of a medical condition that the Social Security Administration treats as a disability. Benefits typically continue until you’re able to work again on a regular basis, with incentives available to encourage a transition back to the work environment.
How Retirement Benefits Work
Social Security replaces a percentage of your pre-retirement income based on their lifetime earnings. The portion of your pre-retirement wages that Social Security replaces is based on your highest 35 years of earnings and varies depending on how much you earn and when you choose to start benefits.
When you work, you pay taxes into Social Security. We use the tax money to pay benefits to:
- People who have already retired.
- People who are disabled.
- Survivors of workers who have died.
- Dependents of beneficiaries.
The money you pay in taxes isnt held in a personal account for you to use when you get benefits. We use your taxes to pay people who are getting benefits right now. Any unused money goes to the Social Security trust fund that pays monthly benefits to you and your family when you start receiving retirement benefits.
If You Were Born In 1960 Your Full Retirement Age Is 67
You can start your Social Security retirement benefits as early as age 62, but the benefit amount you receive will be less than your full retirement benefit amount.
The chart below provides examples of the percentage of your full retirement benefit amount you and your spouse would receive from age 62 up to your full retirement age.