Obtaining/reclaiming Your Social Security Number
Over time, the US Social Security Number has evolved from merely the number of your account for retirement savings to something akin to a single national identification number that follows you throughout your US administrative life. It is indispensable on passport applications, tax returns, financial account reporting and numerous other business forms. And now it has gone international: under FATCA banks and other financial institutions around the world are required to ask American citizen clients for an IRS Form W-9 , which includes their SSN.
For many American citizens living abroad, such requests may cause panic. They havent thought of their SSN for years . Some never had one some have lost theirs, dont remember the number, or dont even know if they ever had one. So, yet another unanticipated fallout of FATCA is the extra workload falling on American embassy and consulate Federal Benefits Units around the world.
Add to this mix the enhanced requirement for high-quality, verified documentation prior to issuing a SSN, due not only to FATCA, but to various recent laws aimed at countering fraud and fear of terrorists. The bottom-line message, particularly for Americans residing abroad, is: verify now that you and any citizen you want to claim as your dependent, have SSNs. If not, roll up your sleeves, assemble your documentation, and apply as soon as possible, because it costs time to obtain a SSN.
Social Security: What Every Woman Needs To Know
When do I become eligible for benefits?
- As a worker: You must work and pay Social Security taxes for at least 10 years , and be at least 62 years old.
- As a spouse or divorced spouse: You must be at least 62 years old. If you are divorced, you must have been married to your ex-spouse for at least 10 years and currently be unmarried.
- As a widow: You must be at least 60 years old . If you are divorced, you can claim the survivors benefit if you were married at least 10 years and are currently unmarried .
If I qualify for more than one benefit, can I receive the total amount of both?
No. You will receive the benefit amount that provides you with the higher monthly benefit, but you do not receive both benefits added together.
When can I receive Social Security retirement benefits?You may receive full benefits at full retirement age. Full retirement age is increasing gradually until it reaches age 67 for those who were born 1960 or later. See the chart below.
|Year of Birth|
What happens to my benefit if I claim early?
If you start your benefits early, your benefits are reduced permanently. Your benefit is reduced about one-half of one percent for each month you start your Social Security before your full retirement age. For example, if your full retirement age is 67 and you sign up for Social Security when you are 62, you would only get 70% percent of your full benefit.
What happens to my benefit if I delay claiming it?
Can I work and still receive my Social Security benefit?
What’s Full Retirement Age
Full retirement age is when you’re eligible to receive full Social Security benefits. Your full retirement age depends on your birth year: Under current law, if you were born in 1955 or later, your full retirement age can be anywhere between age 66 and 2 monthsall the way up to age 67 for those born after 1959. If you were born before 1955, you’ve 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
1954 or earlier
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.
Your May Have To Pay Taxes On Social Security Benefits
Most people know that you pay tax into the Social Security Trust Fund throughout your career, but some retirees don’t realize that you also have to pay tax on your Social Security benefits once you start taking them. Benefits lost their tax-free status in 1984, and the income thresholds for triggering tax on benefits haven’t been increased since then.
It doesn’t take a lot of income for your Social Security benefits to be taxed. 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 12 States That Tax Social Security Benefits.
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Social Security Benefits If Youre Married
Determining Social Security calculations is a bit more complicated if you are married because you have the option to base benefits on your spouses salary history.
If the lesser earning spouses benefits are based on the higher earning spouses, then the limit of those earnings will be 50 percent of the higher earning spouses benefit amount.
To illustrate this, lets talk about A and B, a married couple.
- A makes significantly more money than B.
- A makes so much more money that As monthly Social Security benefits are going to be more than twice of Bs, based on Bs salary history.
- The good news for B is that they can choose to have their Social Security benefits based on As salary history and can receive as much as 50 percent of As monthly benefit. This is the case even if B didnt hold a job outside the home.
On the other hand, if Bs monthly benefit would have been more than half of As, based on Bs salary history, then B can claim that amount.
In short, B can claim the higher of these two possibilities: Bs own Social Security earnings or half of As.
This all assumes that B doesnt begin claiming benefits until B reaches full retirement age. If B begins claiming earlier, then Bs benefits will be less. In addition, if B is claiming benefits based on As earnings, then B does not benefit by waiting later than full retirement age.
B will not be given more monthly benefits if B waits until age 70, for example, based on As earnings.
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.
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How To Calculate Your Own Social Security Spousal Benefits
The spousal benefit calculation is straightforward if you dont have a benefit of your own. Remember, in that case, its between 32.5% and 50% of the higher-earning spouses full retirement age benefit, depending on your filing age.
However, it can seem a little more complicated if you have Social Security benefits from your work history.
And to keep things interesting, the Social Security Administration decided that a different calculation method should be used to determine how much each benefit should increase/decrease based on your filing age.
As complicated as Social Security benefits can seem, there is a way to correctly calculate how much your spousal benefit will be if you qualify to receive it.
Check out this section of my video that goes over this calculation step-by-step. VIDEO: How To Calculate Spousal Benefits The RIGHT Way
If you understand how they break down the individual benefits, its not hard to use the table above to quickly figure out what your approximate benefit will be. Heres an example.
Joe and Julie each have a Social Security benefit from work they individually performed. Julies benefit at her full retirement age is $800 per month. Joes benefit at his full retirement age is $2,000.
Assuming they are both full retirement age when they file, Joe will be entitled to a benefit of $2,000 and Julie will be entitled to the greater of her own benefit or half of Joes benefit.
Sounds simple, right?
Social Security Income Limits
The Social Security Administration reported in October 2021 that the estimated average monthly retirement benefit will be $1,657. While that regular monthly income helps, it’s usually not enough to cover living expenses. That’s one reason many people are working longer.
If you work, the money you bring home can affect your Social Security benefitsbut the specifics depend on your age and how much you earn. Remember that, although your full retirement age might be 67, you can start receiving benefits at 62, even if you’re still working.
But here’s the catch: For the 2021 tax year, if you start benefits before full retirement age, you can only earn up to $18,960 and still get your full benefits. Once you earn more than the limit, Social Security deducts $1 from your benefits for every $2 you earn.
In the year you reach full retirement age, Social Security becomes more forgiving. If you earn more than $50,520 it deducts $1 for every $3 you earnbut only during the months before you reach full retirement age. Once you reach full retirement age, you can earn any amount of money, and it won’t reduce your monthly benefits.
Note, however, that any money deducted from your benefit is not permanently lost. After you reach full retirement age, Social Security will recalculate your benefit and increase it to account for the benefits that it withheld earlier.
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Claiming A Dependent Who Receives Ssi
To determine if you need to complete an SSA 1099 for Child, you need to use the IRS-provided work sheet. Fill in your own tax information as usual. Grab the 1040 instructions and fill in the Social Security Benefits Work Sheet. The total amount of benefits your child received is located in Box 5 of Form SSA-1099, which you shouldve received from the Social Security Administration. After youve entered all the information on the work sheet and calculated the total, if the amount on the last line is zero, your child doesnt have to file. If his wages exceeded $5,950 or he collected more than $950 from any other source, he still has to file taxes but he can exclude the benefits from his income. Complete form 1040, but don’t check either box in the Exceptions section because you can claim him as a dependent. You’ll enter any benefits collected in the first field on Form 1040, on the line labeled, “Social Security Benefits.”
No More File And Suspend
Note that the claiming strategy called file and suspend, which allowed married couples who have reached their FRA to receive spousal benefits and delayed retirement credits at the same time, ended as of May 1, 2016. However, spouses born before Jan. 2, 1954, who have attained their FRA may still be able to file a restricted application. It allows them to claim spousal benefits while delaying their own benefits up to age 70.
Social Security benefits can be taxable if your combined income is high enough.
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Working Outside Of The United States
If you retire and work outside the United States, the rules are different. If you are younger than full retirement age, Social Security will reduce your benefits for every month you work more than 45 hours in a job that’s not subject to U.S. Social Security taxes. That applies regardless of how much money you earn. These rules can get complicated, so you’ll want to contact Social Security for advice on your particular situation.
More Than Just Income: The Social Security Spousal Benefit And Medicare Coverage
If you are eligible for a Social Security spousal benefit, you are also entitled to premium free part A Medicare at age 65. The catch?
Youre entitled to Medicare only if your spouse is at least 62 years old.
If you are more than 3 years older than your spouse, you may have to buy Medicare Part A until your spouse turns 62. Thats when your premium-free benefit would start. The Part A monthly premium is $422 in 2018.
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Beware The Social Security Earnings Test
Bringing in too much money in earned income can cost you if you continue to work after claiming Social Security benefits early. With what is commonly known as the Social Security earnings test for annual income, you will forfeit $1 in benefits for every $2 you make over the earnings limit, which in 2021 is $18,960. Once you are past full retirement age, the earnings test no longer applies, and you can make as much money as you want with no impact on benefits.
Any Social Security benefits forfeited to the earnings test are not lost forever. At your full retirement age, the Social Security Administration will recalculate your benefits to take into account benefits lost to the test. For example, if you claim benefits at 62 and over the next four years lose one full years worth of benefits to the earnings test, at a full retirement age of 66 your benefits will be recomputed — and increased — as if you had taken benefits three years early, instead of four. That basically means the lifetime reduction in benefits would be 20% rather than 25%.
Why It’s Easier To Get Disability After Age 60
For older workers, in particular claimants 60 and older, Social Security must consult a series of tables called the “grids” to decide if a person is disabled. The grids are a set of rules that take into consideration a disability claimant’s age, residual functional capacity , education, and work history to determine whether the claimant should be approved or denied.
The reason claimants over the age of 60 are much more likely to be approved under the grids is because Social Security takes into consideration the fact that it may be harder for older workers to learn new skills and to transition into new workplaces. That said, if you worked at a skilled job before you became disabled and you could put your skills to use at a less demanding type of job, you won’t be approved for disability just because you are older.
Here is what the grids take into account.
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Social Security Survivor Benefits
Social Security benefits may be available if you are the survivor–that is, the spouse, child, or parent of a worker who dies. The deceased must have worked long enough under Social Security to qualify for benefits.
Your survivor benefits are based on the earnings of the person who died. The amount you get is based on your age and the type of benefits you are able to receive each month you receive a percentage of the deceaseds basic Social Security benefits. The maximum survivors benefit you can get is limited to what the deceased would have received in life. Click here for additional details and examples.
Working Can Mean Lower Benefits Until You Reach Full Retirement Age
You can collect Social Security benefits if you are still working and earning income. But if you earn more than a certain amount from your workand haven’t reached your full retirement ageyour benefit will temporarily be smaller. Here’s a rundown of how earned income can reduce your Social Security benefits.
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An Example Of Taxed Benefits
Lets say you receive the maximum Social Security benefit for a worker retiring at FRA in 2021: $3,148 per month. Your spouse receives half as much, or $1,574 a month. Together, you receive $4,722 a month, or $56,664 per year. Half of that, or $28,332, counts toward your combined income for determining whether you have to pay tax on part of your Social Security benefits. Lets further assume that you dont have any nontaxable interest, wages, or other income except for your traditional individual retirement accounts required minimum distribution of $10,000 for the year.
Your combined income would be $38,332half of your Social Security income, plus your IRA distributionwhich would make up to 50% of your Social Security benefits taxable because youve exceeded the $32,000 threshold. Now, you may be thinking, 50% of $56,664 is $28,332, and Im in the 12% tax bracket, so the tax on my Social Security benefits will be $3,399.84.
Fortunately, the calculation takes other factors into account, and your tax would be a mere $225. You can read all about the taxation of Social Security benefits in the Internal Revenue Service Publication 915.