Earn Ssa Work Credits In Some Countries
You may not have enough credits from your work in the United States to qualify for retirement benefits. But, you may be able to count your work credits from another country. The SSA has agreements with 24 countries. If you earned credits in one of those countries, they can help you qualify for U.S. benefits.
Social Security: 10 Smart Ways To Get More Benefits
Without Social Security benefits, 22 million Americans would be poor per a report from the Center on Budget and Policy Priorities. About 21% of married elderly beneficiaries and 44% of unmarried ones get fully 90% or more of their income from Social Security, while about 48% of married elderly beneficiaries and 69% of unmarried ones get 50% or more of their income from it, according to the Social Security Administration.
How much money are we talking about? Well, the average Social Security retirement check was recently $1,417, or about $17,000 annually. If that doesn’t seem like much, know that there are ways to increase your benefits. Here are 10 strategies to consider:
Let’s examine each in more detail.
Theres A Social Security Spousal Benefit
Marriage brings couples an advantage when it comes to Social Security. Namely, one spouse can take what’s called a spousal benefit, worth up to 50% of the other spouse’s Social Security benefit. Put simply, if your monthly Social Security benefit is worth $2,000 but your spouse’s own benefit is only worth $500, your spouse can collect a spousal benefit worth $1,000 — bringing in $500 more in income per month. Just as the benefit based on your own work history is reduced if you claim it early, the same is true for a spousal benefit. That 50% figure is the maximum amount that only a spouse who is at least full retirement age is eligible for. Taking the spousal benefit early at, say, age 62, reduces the amount to as little as 32.5% of the higher earners benefit. If you take your own benefit early and then later switch to a spousal benefit, your spousal benefit will still be reduced.
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Reduction For Disability Payments From Other Sources
If you receive disability benefits from a private source, like a private pension or private insurance benefits, these benefits will not affect your SSDI benefits. If, however, you receive other public disability benefits, they may affect your SSDI benefits. For instance, if you were injured on the job and are receiving workers’ compensation benefits, the amount of SSDI benefits you receive might be reduced.
Other disability benefits that are not job-related and are paid for by the federal, state, or local government may also reduce your SSDI benefit amount. Examples of these include temporary disability benefits paid by the state, military disability benefits, and state or local government retirement benefits that are based on disability. Some public benefits are not counted toward the 80%, including SSI or VA benefits.
The combined total amounts you receive from SSDI and all other public disability benefits cannot be more than 80% of the average amount you earned before you became disabled. If the amount is more than 80% of what your average earnings were before you became disabled, in most states, the excess amount is deducted from your SSDI benefits.
The interaction between workers’ compensation and SSDI can be complicated and varies depending on what state you live in. If you qualify for more than one public disability benefit, you may want to speak with an attorney to make sure you do not miss out on any benefits you are entitled to.
How Do You Qualify For Social Security Retirement Benefits
When you work and pay Social Security taxes, you earn credits toward benefits. Anyone born in 1929 or later, needs 40 credits . If you stop working before you have enough credits to qualify for benefits, the credits will remain on your Social Security record. If you return to work later, you can add more credits to qualify. The SSA wont pay any retirement benefits until you have the required number of credits .
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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 Do Benefits Work And How Can I Qualify
While you work, you pay Social Security taxes. This tax money goes into a trust fund that pays benefits to:
Those who are currently retired
To people with disabilities
To the surviving spouses and children of workers who have died
Each year you work, youll get credits to help you become eligible for benefits when its time for you to retire. Find all the benefits Social Security Administration offers.
There are four main types of benefits that the SSA offers:
Learn about earning limits if you plan to work while receiving Social Security benefits
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How Do I Know If I Will Have Money Taken Out Of My Social Security Check
If you receive Social Security retirement benefits, your Medicare benefits will be deducted automatically. This means that you do not have to do anything to make this happen it will be automatic when you enroll in Medicare.
If you sign up for Original Medicare during your Initial Enrollment Period and already receive Social Security retirement benefits, you should not expect to receive a bill for your premiums. Instead, your Social Security benefit will be smaller, since the money is taken from there.
If you want to find out for sure whether this applies to you, your best bet is to contact the Social Security Administration . They will look up your current status to determine whether payments will be taken out automatically.
Planning For The Impact Of Early Retirement On Social Security
Its important to remember that beyond Just the impact of retiring early on the calculation of projected benefits, that taking Social Security early can reduce benefits by more than 25%, due to the reduction on Social Security benefits claimed before full retirement age.
However, many prospective retirees can ameliorate this impact by simply retiring early, and waiting to actually begin Social Security benefits, simply spending down other assets in early retirement instead .
Yet as shown here, early retirement has a second effect it reduces the calculated Social Security benefit too, or at least fails to accrue more benefits by continuing to work , even if the retiree waits until full retirement age to actually begin the benefits.
However, the actual magnitude of the reduction will depend heavily on what the early retirees recent income is, relative to that individuals earnings history . Which means the starting point is just to log into your account at the SSAs My Social Security website, and look up what your earnings history actually is!
Its also important to determine whether the average historical earnings would put the individual into the 90%, 32%, or 15% replacement rate tier, as the lower the AIME, the higher the replacement rate, and the greater the impact that additional earnings years will have .
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Number Of Credits Needed For Survivors Benefits
The number of credits needed for family members to be eligible for survivors benefits depends on your age when you die. The younger you are, the fewer credits needed. Nobody needs more than 40 credits.
Under a special rule, we can pay benefits to your children and your spouse caring for your children, even if your record doesn’t have the number of credits needed. They can get benefits if you have credits for one and one-half year’s work in the three years before your death.
If you are already receiving retirement or disability benefits at the time of your death, we will pay your survivors based on that entitlement. We will not have to determine your credits again.
How Much Is Taken Out Exactly
There is no standard amount that is taken out of your Social Security check when you sign up for Medicare. Instead, the amount deducted depends on several factors. Each part of Medicare has a different cost. On top of this, Part C and Part D are offered by private plans, which means their monthly premiums vary even more.
Although there are standard monthly premiums for Part A and Part B, the amount changes slightly each year. There are also additional costs that you may have to pay depending on your income level. We discuss these in more detail below.
To find out how much will be taken from your check, you need to refer to some specific parts of Medicare.
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Delaying Retirement Will Increase Your Benefit
For each month that you delay receiving Social Security retirement benefits past your full retirement age, your benefit will increase by a certain percentage. This percentage varies depending on your year of birth. For example, if you were born in 1943 or later, your benefit will increase 8 percent for each year that you delay receiving benefits, up until age 70. In addition, working past your full retirement age has another benefit: It allows you to add years of earnings to your Social Security record. As a result, you may receive a higher benefit when you do retire, especially if your earnings are higher than in previous years.
How Do You Find Out What Your Social Security Benefits Are
Remember, if you receive benefits or have Medicare, you can use your my Social Security online account to:
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How Does The Calculator Estimate My Retirement Benefits Payment
Our simplified estimate is based on two main data points: your age and average earnings. Your retirement benefit is based on how much youve earned over your lifetime at jobs for which you paid Social Security taxes. Your monthly retirement benefit is based on your highest 35 years of salary history. You can get your earnings history from the Social Security Administration .
Your Social Security benefit also depends on how old you are when you take it. You can start collecting at age 62, the minimum retirement age, but youll get a bigger monthly payment if you wait until full retirement age, which is 66 but is gradually moving to 67 for people born in 1960 or after. If you can wait until 70 to start collecting, youll receive your maximum monthly benefit.
A single person born in 1960 who has averaged a $50,000 salary, for example, would get $1,332 a month by retiring at 62 the earliest to start collecting. The same person would get $1,911 by waiting until age 67, full retirement age. And he or she would get $2,370, the maximum benefit on those earnings, by waiting until age 70. Payments dont increase if you wait to collect past 70.
Other factors affecting the size of your benefit include whether youve worked for state or local government for more than 10 years your Social Security payment may be decreased if you paid into the civil service retirement program, for example.
The Impact Of Early Retirement On Calculated Social Security Benefits
Its crucial to recognize that the standard Social Security statement projects benefits assuming continued work, as it means that not working as late as full retirement age can reduce prospective benefits. Not because future benefits are actually reduced by stopping work early . But simply because projected statements assume continued work by default, such that its absence will still result in a lower actual benefit in the future than what was previously projected.
However, the actual impact on Social Security benefits of stopping work before full retirement age varies heavily, depending on what the prospective retiree had already earned in benefits or more specifically, what additional years of work would have done to that individuals highest-35-years earnings history.
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When Should I Start Collecting Social Security
Ultimately, the decision of when to begin collecting Social Security is one you have to make. It depends on your age, your health status, how much you spend and how much you have saved. Its generally best to start collecting as late as you can, because you get a larger monthly payment, which is adjusted for inflation each year.
Consider a retiree who was born in 1950 and averaged $50,000 a year in salary. If she has $3,000 a month in expenses, her Social Security check would cover 48 percent of her expenses if she started Social Security at age 62. If she waited till age 70, her check would cover 84 percent of her expenses. Every year she delays retirement, her Social Security payout which is adjusted annually for inflation rises by about $1,635.
Traditionally, the retirement system in the U.S. has been a three-legged stool: Social Security, savings and pensions. Social Security was never intended to be the sole source of income for retirement. Increasingly, however, employers have been moving away from their employer-sponsored pension plans in favor of tax-deferred retirement savings accounts, such as 401 plans.
Using Your Benefit Estimates
As your statement will show, your Social Security retirement benefits will vary depending on when you claim them before or after your full retirement age . The longer you wait to start receiving payments, the higher your benefit amount will be.
However, it’s not always better to wait until your full retirement age to claim your Social Security benefits. If you need your Social Security benefits for living expenses, or you have a health condition that makes it unlikely that you will live past age 75 or so, you may be better off collecting your benefits sooner rather than later. You can use a calculator at the Social Security website to see which retirement age makes the most financial sense for you .
For comprehensive practical information about how and when to claim Social Security benefits, see Social Security, Medicare & Government Pensions, by Joseph Matthews with Dorothy Matthews Berman .
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Retiring Early Will Reduce Your Benefit
You can begin receiving Social Security benefits before your full retirement age, as early as age 62. However, if you retire early, your Social Security benefit will be less than if you wait until your full retirement age to begin receiving benefits. Your retirement benefit will be reduced by 5/9ths of 1 percent for every month between your retirement date and your full retirement age, up to 36 months, then by 5/12ths of 1 percent thereafter. For example, if your full retirement age is 67, you’ll receive about 30 percent less if you retire at age 62 than if you wait until age 67 to retire. This reduction is permanent–you won’t be eligible for a benefit increase once you reach full retirement age.
However, even though your monthly benefit will be less, you might receive the same or more total lifetime benefits as you would have had you waited until full retirement age to start collecting benefits. That’s because even though you’ll receive less per month, you might receive benefits over a longer period of time.
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.