Monday, May 9, 2022

How To Calculate Social Security Benefits At Age 70

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If You Want To Invest The Cash

How to Easily Calculate Your Social Security Benefit for Any Age Between 62 & 70

Nowhere does it say you’re required to spend the money you get from Social Security. You can invest it in stocks, bonds, real estate or whatever.

One investment-related thing you cannot do with Social Security money is count it as “earned income” to qualify for contributions to an IRA. However, you can still invest via a regular taxable account. Just remember that in the short term, some investments can be very volatile and not appropriate for any cash you know you’ll need in the near term . Weigh that against the guaranteed return you would get on your money by waiting to file and amassing more delayed retirement credits.

» FURTHER READING:5 steps to retirement planning

Calculating Your Social Security Break

The timing of your Social Security benefits is important it could make a difference of tens of thousands of dollars in your retirement income over your lifetime. And though there are many factors to consider when evaluating Social Security benefits , its fairly simple to calculate your Social Security break-even age. Lets use an example to illustrate the calculation:

Our hypothetical subject, Jeff, has reached full retirement age and is deciding whether to begin collecting benefits now or to delay for one year. If he collects now, hell receive $1,000 per month. But if he waits to take his benefit, it will increase by 8% each year after his full retirement age . Therefore, if Jeff waits a year to apply for benefits, hell get $80 more, for a total of $1,080 per month. If Jeff decided to wait that year, how long would it take him to break even?

Essentially, Jeff forfeited $12,000 , but gained $80 a month. To find out his break-even age, Jeff would divide $12,000 by $80 a month, which comes out to 150 months, or 12½ years. So, if Jeff waits for one year to start taking his Social Security benefit, it will take him 12½ years to get back to even.

Based on the above, if Jeff thinks he’ll live more than 12½ years, it could make sense to delay taking Social Security, because he would eventually come out ahead. If not, he may want to take his benefits now.

How Do You Calculate Your Social Security Taxes

“Social Security taxes” can refer to taxes paid into the Social Security system or taxes paid on Social Security benefits. The taxes that fund Social Security come from the payroll tax, which is 6.2% for employees or 12.4% for self-employed individuals.

When you’re receiving Social Security benefits, you’ll still have to pay income taxes, but you won’t owe taxes on all of your benefits. Those whose total annual income tops $34,000 will pay income tax on 85% of their Social Security benefits. Otherwise, they will pay income tax on 50% of their Social Security benefits.

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Do You Expect To Live A Long Life

Many people live longer than they expect.

Because Social Security provides guaranteed income for life, it’s especially valuable to you when you reach age 80 and beyond. Claiming benefits at your full Social Security benefit age or later could be a good way to secure your monthly income during your later years. Your benefit increases the longer you wait to claim, up to age 70, and is adjusted annually with the cost of living. If you live into your 80s but claim at age 62 instead of your full retirement age or later, your total lifetime benefits will be lower by thousands of dollars.Calculate your expected longevity.

Claiming at your full benefit age could still make sense for you.

We understand it’s difficult to make predictions. You may want to plan for the possibility that you may spend 20 or more years in retirement. On average, a woman reaching age 65 today will live to age 87, and a man will live to age 84. Waiting to claim as long as you can could still make sense for you if you are married, are the higher earner in the household, and want your surviving spouse to keep the highest monthly benefit after you die. Remember, you can claim at any point between age 62 and 70. Each additional month that you wait to claim gives you a permanent increase in your monthly benefit which becomes more valuable as you age.Calculate your longevity.

There’s a good chance that you’ll live into your 80s and beyond.

Spouses Survivors And Dependents

Should You Delay Applying For Social Security Past Age 70 ...

Spouses, survivors and qualifying dependents can collect Social Security benefits based on the primary insured’s PIA.

A spouse can claim 50% of the primary worker’s full PIA if they retire at the Normal Retirement Age or if they are caring for a qualified child. A spouse who is not caring for a qualified child and who retires after 62 but before their Normal Retirement Age will get reduced benefits down to a low of 32.5% of the primary worker’s benefit.

A qualifying child can claim up to 50% of a retired worker’s benefits or, if they are a surviving child, up to 75% of a deceased worker’s benefits. However,;in cases where a family has multiple claimants , the combined family benefit is capped at between 150 – 180%;of the primary worker’s benefits.

Finally, a surviving spouse who has reached their Normal Retirement Age can opt to collect their deceased spouse’s benefits instead of their own. In this case, they will receive 100% of the primary worker’s benefits. A younger widow/widower who is caring for a qualified child can collect 75% of the primary worker’s benefits.

You can only collect under one benefits program. Any beneficiary who qualifies for multiple sources of income will receive the higher of their qualifying benefits.

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Claiming Social Security At Age 66

If you were born between 1943 and 1954, your;Full Retirement Age;is 66. Claiming at your;Full Retirement Age;will entitle you to your full benefit amount, but you can still wait to claim. If you wait further, you will garner delayed retirement benefits, which will increase your monthly benefit when you do start collecting.

At Full Retirement Age you can work without any deductions from your benefit amount. However, you may still be;taxed on your benefit;if you have other substantial income such as wages, self-employment, interest, or dividends. If so, the Internal Revenue Service taxes your combined income which is your adjusted gross income, plus nontaxable interest, plus half of your Social Security benefits.

If you file a federal tax return as an individual and your combined income is between $25,000 and $34,000, you will have to pay income tax on up to half your benefits. If your income is more than $34,000, up to 85 percent of your benefits might be taxable.

If you are married and file a joint return, and your income together is between $32,000 and $44,000, you may have to pay income tax on up to half your benefits. If your income exceeds $44,000 you may have to pay income tax on up to 85 percent of your benefits.

If You’re Eligible For Benefits On Someone Else’s Record

If you’re half of a twosome even a divorced twosome the effect of all the issues above should be considered for both parties and, if living together, on you as a couple. For example, a spouse in poor health may want to start benefits earlier while the healthier one delays filing. Or if you’re the higher earner, you may want to delay receiving a heftier benefit while you’re still alive and, if you die first, leave behind higher survivor protection for your spouse.

Also Check: How To Access My Social Security Account Online

Timing And Your Health Coverage

Your health insurance coverage can also play a role in deciding when to claim Social Security benefits. Do you have a health savings account to which you would like to keep contributing? If so, note that if youre age 65 or older, then receiving Social Security benefits requires you to sign up for Medicare Part A, and once you sign up for Medicare Part A, youll no longer be allowed to add funds to your HSA.

The SSA also cautions that even if you delay receiving Social Security benefits until after age 65, you might still need to apply for Medicare benefits within three months of turning 65 to avoid paying higher premiums for life for Medicare Part B and Part D. If you are still receiving health insurance from your or your spouses employer, however, then you might not yet have to enroll in Medicare.

On March 17, 2020, all Social Security offices were closed completely due to the COVID-19 pandemic. As of Aug. 5, 2021, they are only open by appointment, and to get an appointment, you need to be in a limited, critical situation. Most people will have to transact their business online, by phone, or through the mail.

Who Is Eligible For Social Security Benefits

How to Calculate Your Social Security Benefits

Anyone who pays into Social Security for at least 40 calendar quarters is eligible for retirement benefits based on their earnings record. You are eligible for your full benefits once you reach full retirement age, which is either 66 and 67, depending on when you were born. But if you claim later than that – you can put it off as late as age 70 – youâll get a credit for doing so, with larger monthly benefits. Conversely, you can claim as early as age 62, but taking benefits before your full retirement age will result in the Social Security Administration docking your monthly benefits.

The bottom line: Youâre eligible for Social Security Benefits if youâve paid into the system for at least a decade, but your actual benefits will depend on what age â between 62 and 70 â you begin to claim them.

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Average Retirement Age In The Us

According to the Federal Reserve, the most common age to retire is 62. Though this coincides with the earliest age you’re eligible to draw Social Security, when you retire doesn’t necessarily have to revolve around Social Security or retirement account rules. What’s appropriate depends on who you ask.

Half of the respondents from the Federal Reserves 2019-2020 report on the Economic Well-Being of U.S. Households said they retired before age 62. Almost one-fourth of retirees retired between 62 and 64.

According to a 2019 survey by the Insured Retirement Institute, 24% of baby boomers plan to retire before they turn 65, 29% plan to retire between age 65 and 69, and 26% plan to retire at age 70 or older. Another 8% said they plan to never retire.

A 2018 Gallup poll of nonretired Americans found that people, on average, plan to retire at age 66.

  • People ages 18-29 expect to retire at age 63, on average.

  • People ages 30-49 plan to retire at age 65, on average.

  • People ages 50-64 plan to retire at age 67, on average.

  • Since 2009, Americans have said they expect to retire when they’re 65 to 67 years old, according to Gallup. Only 12% of Americans said they want to retire before age 60.

Many people consider their eligibility for various retirement benefits alongside their personal financial situation to pinpoint their optimal retirement age.

Should You Wait To Start Collecting Old Age Security

You can receive your first Old Age Security pension payment the month after you turn 65.

You can receive a higher amount for each month you decide to delay your first payment.

You can delay payment of the Old Age Security pension for up to 60 months after you are 65. The longer you delay, the larger your pension payment will be each month.

After age 70, there is no advantage in delaying your first payment. In fact, you risk losing benefits. If you are over the age of 70 and are not receiving an Old Age Security pension, apply now.

If you are eligible for the Guaranteed Income Supplement, there is also no advantage in delaying your first payment.

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Understanding The Basics Of My Choices

At this point, though, Im not making the decision of when to take my first Social Security check. Instead, Im just beginning to understand my choices.

Normal or full retirement age is determined by an individuals birth date. For those born in 1960 or later , full retirement age is 67 years. Further, I can claim benefits as early as 62 and delay claiming as late as 70. If I start early, then my monthly benefit is reduced; if I start later, my benefit is increased compared to my regular benefit.

More specifically, here are the formulas for determining my monthly paycheck :

  • Take full retirement benefit at age 67
  • From 64 years to 66 years, 11 months, reduce the normal benefit by 5/9 of 1% each month I take an early retirement
  • From 62 years to 63 years, 11 months, further reduce the normal benefit by 5/12 of 1% each month I take a really early;retirement;in addition to the previous reductions
  • From 67 years, one month until age 70, add delayed retirement credits each month equal to;8% divided by 12

I can get an estimate of my monthly paycheck for retirement benefits by setting up and logging into an account with the Social Security Administration;. Information provided includes an estimate of my monthly check at full retirement as well as amounts at age 62 and age 70.;Ill note that the formulas provided above mesh with the dollar amount indicated in my SSA dashboard for the delayed retirement but dont match the early retirement number exactly .

Myth #: You Can Claim Early Then Get A Bump Up Once You Reach Full Retirement Age

Social Security Age: Claim at 62 or Wait until 70 ...

Many believe there is a “bump up” or “added income” once they reach their FRA. They’ve heard they can claim early at 62, then when they reach 66 or older, their checks will increase to the amount that corresponds to their FRA benefit. That’s a big misperception.

There’s no bumping up of income once you’ve claimed your Social Security retirement benefit. However, anyone receiving a benefit can voluntarily “suspend” that benefit after they reach FRA and resume it as late as age 70. If they do, the annual benefit will increase by 8% per year of delay up until age 70. After that, you get an annual cost of living adjustment, but no increase in your base benefit, which will start automatically the month you reach age 70 unless you specify otherwise.

Read Viewpoints on Fidelity.com: Social Security do-over: Claim, suspend, and restart

In general, you can cancel your Social Security claim if you do so within the first 12 months of receiving benefits.2 You must repay the full amount you’ve received, and the full amount a current spouse or family member received based on your benefit. Then, you’re eligible to claim again at a later date and will receive a larger monthly payment. Each individual can only cancel a claim once in their lifetime.

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How Much Will I Get From Social Security

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 2021 is $1,543 a month. The maximum benefit; the most an individual retiree can get; is $3,148 a month for someone who files for Social Security in 2021 at full retirement age, or FRA .

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.

Both tools project what you could collect each month if you start Social Security at age 62, the earliest you can file; at full retirement age, currently 66 and 2 months and gradually rising to 67; and at age 70. Between 62 and FRA, Social Security reduces your benefit for filing early; between FRA and 70, it increases your payment as a reward for waiting.;

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If You Were Born Between 1943 And 1954 Your Full Retirement Age Is 66

If you start receiving benefits at age 66 you get 100 percent of your monthly benefit. If you delay receiving retirement benefits until after your full retirement age, your monthly benefit continues to increase.

The chart below explains how delayed retirement affects your benefit. The increase is based on your date of birth and the number of months you delay the start of your retirement benefits. If you start receiving retirement benefits at age:

  • 67, you’ll get 108 percent of the monthly benefit because you delayed getting benefits for 12 months.
  • 70, you’ll get 132 percent of the monthly benefit because you delayed getting benefits for 48 months.

When you reach age 70, your monthly benefit stops increasing even if you continue to delay taking benefits.

Also Check: Can You Collect Social Security At Age 62

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