You Qualify To Receive Benefits As A Child
Qualifying children can get benefits based on a parent’s work record, in some cases. To get benefits, the child must be unmarried and either under age 18, a high school student age 18 or 19, or disabled with a disability that started prior to reaching age 22. Also, the parent must be getting Social Security benefits of some kind.
Most retirement-age parents don’t have minor children, so these benefits are more common in situations involving disability benefits. However, in some cases, the added money available for qualifying children can make a difference in the optimal decision of when the parent should file for Social Security retirement benefits.
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.
Tips For Getting Retirement Ready
- Retirement planning with a financial advisor can be extremely helpful. Finding a qualified financial advisor doesnt have to be hard. SmartAssets free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If youre ready to find an advisor who can help you achieve your financial goals, get started now.
- Figure out how much youll need to save to retire comfortably. An easy way to get ahead on saving for retirement is by taking advantage of employer 401 matching.
You May Like: What Will My Social Security Check Be When I Retire
Taxes On Your Benefits
Your Social Security benefits may be partially taxable if your combined income exceeds certain thresholds. Regardless of how much you make, the first 15% of your benefits are not taxed.
The SSA defines combined income using this formula:
- Your adjusted gross income + nontaxable interest + half of your Social Security benefits = your combined income
If you file your federal tax return as an individual and your combined income is $25,000 to $34,000, then you may have to pay income tax on up to 50% of your benefits. If your combined income is more than $34,000, you may have to pay tax on up to 85% of your benefits.
If youre married, filing a joint return, and your combined income is $32,000 to $44,000, then you may have to pay income tax on up to 50% of your benefits. If your combined income is more than $44,000, you may have to pay tax on up to 85% of your benefits.
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.
Recommended Reading: When Can I Collect Social Security
Is It Better To Take Social Security At 62 Or Wait
Are you listening to the media and planning to work indefinitely building your retirement nest egg? Are you waiting until age 70 to apply for Social Security benefits so you can get the highest monthly payout? Waiting until 70 is not necessarily the best idea. In this article, Ill explain how it is better to take Social Security at 62 because applying later could cost you.
Understanding Full Retirement Age
Your full retirement age is the age at which you qualify for 100% of yourSocial Security benefits and is based on your birth year.
Find Your Full Retirement Age
|Year of Birth|
|1960 and later||67|
*If you were born on January 1st of any year you should refer to the previous year. If you were born on the 1st of the month, the Social Security Administration figures your benefit and your full retirement age as if your birthday was in the previous month.
Don’t Miss: Social Serity
Youll Miss Out Big Time If Your Spouse Plans To Collect Spousal Benefits
With the exception of our self-employment, Ive been a homemaker raising children.
During those years, at the advice of my accountant, I took a salary and paid social security taxes on my earnings.
Unfortunately, I didnt have enough credits in my account when it came time to collect. In spite of that, I was able to file for spousal benefits based on my husbands earnings.
For more information on how I did that, read my article, Im a Homemaker, Can I Collect Social Security Benefits if Ive Never Worked.
I receive a monthly check amounting to half of what Rebel Retiree receives in benefits.
Again, lets do the math with the average benefit amount of $1,500 reduced by 30% due to filing at 62.
At 62, a person would receive $1,050 plus $525, which is half of the highest wage earner amount. Thats a total of $1,575 per month.
Over 4 years, that comes to $75,600 that you would have given up if you decided to apply for Social Security Benefits later instead of sooner.
While not every spouses age is within a year or two of the other, its prudent to take a look at your particular situation and determine where you will receive the most benefit.
Great Americanit Pays To Keep Things Simple
As a leading provider of annuities, Great American Life Insurance Company is committed to helping people plan for a secure retirement. We offer a level of financial strength that our customers can count on. We are a wholly owned subsidiary of MassMutual, one of the largest life insurance companies in the U.S., founded in 1851.
Recommended Reading: Amount Of Social Security
Your Monthly Social Security Benefits Increase The Longer You Wait To Claim
You can collect Social Security benefits as soon as you turn 62, but taking benefits before your full retirement age means a permanent reduction in your payments of as much as 25% to 30%, depending on your full retirement age.
If you wait until you hit full retirement age to claim Social Security benefits, youll receive 100% of your earned benefits. But you can also get a big bonus by waiting to claim your Social Security benefits at age 70 your monthly Social Security benefit will grow by 8% a year until then. Any cost-of-living adjustments will be included, too, so you don’t forgo those by waiting.
Waiting to claim your Social Security benefits can help your heirs as well. By waiting to take her benefit, a high-earning wife, for example, can ensure that her low-earning husband will receive a much higher survivor benefit in the event she dies before him. That extra income of up to 32% could make a big difference.
When To Start Receiving Retirement Benefits
A secure comfortable retirement is every worker’s dream. And now because we are living longer healthier lives, we can expect to spend even more time in retirement than our parents and grandparents did. Hi, I am Mike Baksa of the Social Security Administration. As a Social Security representative, I am often asked what is the best age to start receiving retirement benefits? The answer is there really is no one best age for everyone. You can start your Social Security retirement benefits as early as age 62 or as late as age 70. Your monthly benefit amount will be different depending on the age you start receiving it.
If you begin receiving benefits before your full retirement age, you will receive a reduced benefit. You can choose to retire as early as age 62, but doing so will result in lower benefits. On the other hand, starting your benefits after full retirement age may result in larger benefits. With delayed retirement credits you can receive your largest benefit by beginning to receive benefit payments at age 70. If you were born between 1943 and 1954 and are now considering retirement, the reduction for early retirement at age 62 is 25 percent. Then again, delaying benefits until age 70 results in an increase of 32 percent. The increase in full retirement age was the result of the 1983 amendments to the Social Security act by Congress.
Recommended Reading: How Do I Find Out How Much Social Security I Will Receive
A Quick Note About Life Expectancy: According To The Social Security Administration Average Life Expectancy For A 65
Your spouse: If you are married, you can explore additional strategies to maximize the benefits you receive collectively. Start by taking your spouse’s age, health, and benefits into account, particularly if you’re the higher-earning spouse. The amount of survivor benefits for a lower-earning spouse could depend on the deceased, higher-earning spouse’s benefitthe bigger the higher-earning spouse’s benefit, the bigger the benefit for the surviving spouse.
Whether you’re still working. Earning a wage can reduce your benefit temporarily if you take Social Security early. If you’re still working and you haven’t reached your full retirement age, $1 in benefits will be deducted for every $2 you earn above the annual limit .
In the year you reach your full retirement age, the reduction falls to $1 in benefits deducted for every $3 you earn above a higher limit . However, starting the month you hit your full retirement age, your benefits are no longer reduced no matter how much you earn.
Again, any reduction in benefits due to the earnings test is only temporary. You receive the money back in the form of a recalculated higher benefit beginning at full retirement age, so don’t use the reduction as the sole reason to cut back on working or worrying about earning too much.
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.
You May Like: How Do They Figure Your Social Security
Can You Afford A Hit To Your Monthly Income
Age 65 is when Medicare eligibility begins. And if you’re enrolling in Medicare, you may be inclined to sign up for Social Security at the same time. In fact, you might think you should sign up for benefits because you’ll be using the Social Security Administration’s website to enroll in Medicare online.
But age 65 is not full retirement age for Social Security purposes. And claiming benefits before FRA means reducing them in the process on a permanent basis.
If you were born in 1960 or later, FRA is age 67. If you were born earlier, it’s either 66 or 66 and a specific number of months.
But let’s assume your FRA is 67. If you claim Social Security at age 65, you’ll slash your monthly benefits by about 13.34%. That may not seem like a big deal at first, but in reality, it could be huge.
Imagine that 13.34% reduction results in $200 less in Social Security income each month, or $2,400 a year. In case you haven’t noticed, inflation has been soaring this year, and in a situation like that, not having an extra $200 on hand could be financially catastrophic.
Then there’s the fact that Social Security will only replace about 40% of your pre-retirement earnings to begin with, assuming you make an average salary. Most seniors need roughly twice that much income to maintain a decent lifestyle.
Our Decision On When To Take Social Security
Strangely, none of this analysis applies to me. Ill only be 55 when I retire next year, so I dont have to decide anything for another 7 years. I suspect the topic of Social Security will undergo significant change during those 7 years, and Ill be required to conduct an entirely new analysis when I get closer to my decision point. If Im still writing in 7 years, watch out for another post on this topic!
Therefore, this analysis is primarily for my readers who are currently making the decision .
However, If I were forced to decide today, Id likely decide to defer until Age 70. I have very few levers available to me to protect against longevity risk, and Id be inclined to pull this lever as one means of minimizing my risk of living to 100. Similar to my view on longevity annuities , I like the idea of Risk Management techniques which offer me a way to minimize my risk of a long life. I plan on being around a while, and I want to make sure I protect my cash flow in my later years.
Don’t Miss: How To Start My Social Security Benefits
Took Social Security At 62 But Now
I’m 63 and took Social Security monthly benefits at 62. Now I have a job opportunity which makes at least $50,000 per year. I know it reduces my benefits per month and I’ve read what it reduces but not smart enough to calculate the math! Guess what I’m asking is will I still receive any benefits or none at all? If none at all can again apply at say 67 if I choose to do so?
Starting To Receive Benefits At 62 Isn’t So Bad
Don’t feel bad if it looks like you’ll be turning on the Social Security faucet early instead of waiting until age 70 for those much fatter checks. Remember that you’ll get many more checks by starting early. For example, if you start at age 62 and live to age 85, that’s 23 years, meaning 276 months of checks. Someone who starts at age 70 and lives to 85 is looking at 15 years and 180 months of checks.
Indeed, for those who live an average-length life, the total benefits received will be roughly the same, no matter when they start collecting. That’s how the Social Security program is designed.
Starting early also makes sense if your family tends to not live long life spans or if you’re in poor health and stand a decent chance of living a shorter-than-average life.
You May Like: How Do I Look Up My Child’s Social Security Number
How Can I Apply For Social Security At Age 62
Your Social Security eligibility begins during the first full month in which you are age 62, which is the month after your birthday in most cases. You can apply for Social Security four months before that date. For instance, if you turn 62 in May, you can apply in February to begin receiving benefits from Social Security in June.
There is an important exception to this guideline. People with birthdays that fall on the first or second day of the month can begin receiving benefits during the month in which their birthday falls. For these individuals, an example would look like this:
You can apply for Social Security online or visit your local Social Security Administration office to apply for benefits.
Adding An Annuity To Fill The Income Gap
As you consider these various factors, you may find yourself wondering ifyour sources of income will last the rest of your life. If this is the case, anannuity may be an appropriate addition to your lineup of income vehicles.An annuity is a contract between you and an insurance company and isdesigned to protect and grow your money before providing a guaranteedstream of lifetime income. Heres an example of how an annuity could beincorporated into your retirement income plan:
There are many different types of annuities to fit your uniquegoals for retirement. Some key benefits include:
- Principal protection to help keep your assets safe
- Growth potential to help you accumulate assets
- Tax-deferral for faster accumulation than taxable products
- Guaranteed lifetime income to help ensure peace of mind
Great American specializes in offering annuities that areeasier to understand, helping you to achieve your goals withno surprises. Talk with your financial professional about howan annuity could fit into your retirement income plan.
Read Also: So Ial Security