There Are Social Security Benefits For Surviving Spouses And Children
If your spouse dies before you, you can take a Social Security survivor benefit, but not in addition to your own benefit. You must choose one or the other. If you are at full retirement age, that benefit is worth 100% of what your spouse was receiving at the time of his or her death .
A widow or widower can start taking a survivor benefit at age 60, but the benefit will be reduced because it’s taken before full retirement age. If you remarry before age 60, you cannot get a survivor benefit. But if you remarry after age 60, you may be eligible to receive a survivor benefit based on your former spouse’s earnings record.
Eligible children who are under age 18 or were disabled before age 22 can also receive a Social Security survivor benefit, worth up to 75% of the deceased’s benefit.
Theres An Annual Social Security Cost
One of the most attractive features of Social Security benefits is that every year the government adjusts the benefit for inflation. Known as a cost-of-living adjustment, or COLA, this inflation protection can help you keep up with rising living expenses during retirement. The Social Security COLA is quite valuable its the equivalent of buying inflation protection on a private annuity, which can cost a pretty penny.
Because the COLA is calculated based on changes in a federal consumer price index, the size of the COLA depends largely on broad inflation levels determined by the government. In 2021, Social Security beneficiaries will see a 1.3% COLA in their monthly Social Security benefits.
The Kiplinger Letter forecast in March that the 2022 COLA would be 3%, which would be the largest increase since 2012 when Social Security benefits ticked up 3.6%.
Heres what COLAs have been in other recent years:
- 2009: 5.8%
- 2021: 1.3%
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.
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Check Different Claiming Ages
If you don’t like the benefit estimate you see for claiming at 62, try testing other claiming ages. You can also do this right from your account, using the slider below the benefit chart. Move the slider to age 63, for example, and you’ll see a new, higher benefit estimate. Move it again to 63 and 1 month, and the benefit goes up again.
Here’s how the math works. You qualify for your full benefit at FRA. When you claim early, your benefit is reduced according to the number of months until you reach FRA. For the first 36 months, the monthly reduction is five-ninths of 1%. For any months beyond 36, the monthly reduction is five-twelfths of 1%. Delaying your claim for even one month translates to higher Social Security income, because you reduce the number of monthly reductions applied to your benefit.
Know The Impact Of Continuing To Work
When you claim Social Security at 62, know that you are subject to a cap on wage income. For every $2 you earn above the cap, your Social Security benefit is reduced by $1. The cap changes annually, but it’s $18,960 in 2021. If you expect to earn $1,000 monthly from Social Security, it only takes wage income of about $43,000 to wipe out your benefit entirely.
Once you reach your FRA, the earnings restriction falls away. You can work and earn as much as you want, without any reduction to your benefit.
When You Choose To Start Taking Social Security Benefits
The yearand even the month within that yearthat you choose to begin taking Social Security benefits affects how much you receive each month. You can start claiming Social Security benefits early as age 62, the current early retirement age. But you wont get your full PIA. Itll be reduced based on how many months you have until your full retirement age. This reduction can really add up, topping in at as high as 30% for particularly early claimers.
You can avoid these surcharges on your PIA, of course, simply by waiting to start payments until your full retirement age. This is generally between ages 66 and 67, depending on when you were born.
You can even add onto your base amount by delaying when you start benefits. After you reach full retirement age, you can boost your benefits by up to 8% of your PIA annually simply by not claiming Social Security. These benefit increases are known as delayed retirement credits, and you can accrue them up to age 70.
An important note: These benefit rate changes are performed to provide roughly the same cumulative benefit over a lifetime, assuming a roughly average lifespan. In other words, if you start Social Security earlier, youll probably claim it for longer someone with the same lifespan who delayed payments would claim them for less time. To provide them the same total benefit, earlier payments must be smaller and later benefits have to be larger to catch up.
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 Does The Social Security Administration Calculate Benefits
Benefits also depend on how much money youâve earned in life. The Social Security Administration takes your highest-earning 35 years of covered wages and averages them, indexing for inflation. They give you a big fat âzeroâ for each year you donât have earnings, so people who worked for fewer than 35 years may see lower benefits.
The Social Security Administration also makes annual Cost of Living Adjustments, even as you collect benefits. That means the retirement income you collect from Social Security has built-in protection against inflation. For many people, Social Security is the only form of retirement income they have that is directly linked to inflation. Itâs a big perk that doesnât get a lot of attention.
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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Review Your Earnings History
While you are still logged into your account, look for the link to your earnings history. Click on it to see a full list of your wage income, dating back to your earliest days of working. Your Social Security benefit is calculated from these numbers. If some of your income is missing or incorrect, your benefit estimate may also be wrong.
Review your earnings history alongside your tax returns, paying particular attention to the years you earned the most. The Social Security formula only considers your highest-paid 35 years of working, so any issues in your lower-wage years may not be relevant.
If you see any mistakes, gather up W-2 forms, pay stubs, or tax returns showing your correct wages. You’ll have to call the Social Security Administration, explain the problems you see, and present your documentation to get your earnings statement corrected.
How Your Social Security Benefits Are Calculated
Your Social Security benefits are based on the 35 calendar years in which you earned the most money. If you have fewer than 35 years of earnings, each year with no earnings will be factored in at zero. You can increase your Social Security benefit at any time by replacing a zero or low-income year with a higher-income year.
There is a maximum Social Security benefit amount you can receive, though it depends on the age you retire. For someone at full retirement age in 2021, the maximum monthly benefit is $3,113. For someone filing at age 70, the maximum monthly amount is $3,895.
You can estimate your own benefit by using Social Security’s online Retirement Estimator.
Claiming Social Security Benefits At The Right Time Means More Money In Your Pocket Here’s A Guide To Everything From Knowing Your Full Retirement Age To Taking Social Security Spousal Benefits
For many Americans, Social Security benefits are the bedrock of retirement income. Maximizing that stream of income is critical to funding your retirement dreams.
The rules for claiming Social Security benefits can be complex, but this guide will help you wade through the details. By educating yourself about Social Security, you can ensure that you claim the maximum amount to which you are entitled.
Here are 12 essential details you need to know.
How Can I Find Out More About Ssdi
- Visit www.ssa.gov online choose disability, then select publications
- Visit ssabest.benefits.gov to learn about Social Security benefits you might be eligible for including SSDI
- Go to your nearest Social Security office
You can find out how much you would get from SSDI by looking at your Social Security statement. The statement shows your work history and an estimate of what your benefits would be at this time. To get a Social Security statement:
- Request a statement online through Social Securitys website at www.ssa.gov. Click on My Social Security on the left side of the page.
Note that SSDI is different from SSI . SSI is for low-income people who didnt pay enough into Social Security during their working years, or who havent worked recently enough to qualify for SSDI. See our information on Supplemental Security Income for more. To get SSI or SSDI, a person must meet Social Securitys definition of disability.
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What Is A Social Security Card
Your Social Security card is an important piece of identification. You’ll need one to get a job, collect Social Security, or receive other government benefits.
When you apply for a Social Security number , the Social Security Administration will assign you a nine-digit number. This is the same number that is printed on the Social Security card that SSA will issue you. If you change your name, you will need to get a corrected card.
How Much Social Security Will I Get A Step
Whether youre eligible for full Social Security benefits at 66 or 67, it can help to know how much of a payout you can expect. Heres how to calculate the amount.
- You need to work for at least 10 years in order to qualify for Social Security.
- Your Social Security benefit will be based on your 35 highest earning years.
- Your benefits may be reduced or increased depending on when you start taking them.
Youve worked hard all your life, and now its time to retire. But even if you plan to continue working, you may be able to start collecting Social Security to supplement that income.
Before you can make those decisions, though, you need to know how much money you can expect to collect. You can get that information through the Social Security Administration website, but until its time for benefits to be issued, it serves as only an estimate. By making those calculations yourself, youll be better able to see how your decisions today affect your future benefits. Using the steps below, youll be able to create a Social Security calculator that will give you a more accurate picture of the monthly dollar amount you can expect to receive.
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How Your Primary Insurance Amount Is Calculated
Once you have your AIME, you can calculate your primary insurance amount , the base rate for your Social Security payments. The PIA calculation relies on so-called bend points that determine how much of your income will be replaced by Social Security benefits in retirement.
Think of bend points as similar to tax brackets, in that they determine a percentage of your benefits based on incremental buckets of earnings. There are three bend point buckets: one for 90% of income replacement, one for 32% and one for 15%.
These bend point buckets help give lower lifetime earners a higher percentage of income replacement, and higher lifetime earners a lower rate of income replacement, says Jim Blankenship, certified financial planner and author of A Social Security Owners Manual.
The dollar amounts of bend points are adjusted for inflation each year, but the percentages of each bend point are set by law and remain unchanged. AIME amounts are always rounded down to the nearest $0.10. For 2021, the bend points are:
90% of the first $996 of your AIME, plus
32% of your AIME between $996 and $6,002, plus
15% of your AIME over $6,002
For a worker with an AIME of $6,250, the calculation would look like this:
90% of $966 = $896.40, plus
32% of $5,006 = $1,601.92, rounded down to $1,601.90, plus
15% of $248 = $37.20
This worker would earn a monthly Social Security benefit of $2,535.50 .
Who Is Eligible For 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.
Benefits May Be Taxable
You will have to pay taxes on your benefits if you file a federal tax return as an individual and your total income is more than $25,000. If you file a joint return and you and your spouse make more than $32,000 jointly, you will have to pay taxes on your benefits. For more information, call the InternalRevenue Service at 800-829-3676.
Managing Your Social Security
Your online account at my Social Security is a powerful tool that’ll tell you what benefit you’ll get at 62. It’s also handy for tracking your earnings and estimating your benefits under different scenarios. Once you dive in and start exploring the value of delaying Social Security, you may even decide to extend your timeline. And then you can start daydreaming about more pleasant things, like a comfortable and relaxing retirement.