Gaining Back The Reduction In Benefits From Working
The amounts of early retirement benefits you lose as a setoff against your earnings are not necessarily gone forever. When you reach full retirement age, Social Security will recalculate upward the amount of your benefits to take into account the amounts you lost because of the earned income rule. The lost amounts will be made up only partially, however, a little bit each year. It will take up to 15 years to completely recoup your lost benefits. And remember, none of this readjustment will change the permanent percentage reduction in your benefits that was calculated when you claimed early retirement benefits .
Earn More At Your Place Of Employment
Of course, you dont need this strategy to be your incentive for trying to increase your salary. But if you have some low-earning years in your 35-year work record , youll want to replace them with higher paying years. Or if you are thinking of working part time for several years, you may want to work full time for fewer years to have the higher income on your record.
Work Until Full Retirement Age
Another step you can take to maximize your Social Security benefits is to work until your full retirement age . Originally, this number was set at 65. But it has been steadily creeping up, thanks to the passage of the Social Security Amendments of 1983 . Starting in 2000, the full retirement age has been increasing in two-month increments so that its 67 for people born in 1960 or later.
If you dont wait till your FRA, the earliest you can start receiving Social Security is 62 years old. However, your benefit will be reduced by up to 30% if your FRA is 67 in this case.
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You May Have To Pay Taxes On Social Security Benefits
Many Americans pay taxes on their Social Security benefits. The exact amount youll need to pay depends on your total income.
It does not take a lot of income for your benefits to be taxed, Kahn said.
If youre a single filer and earn between $25,000 and $34,000, you may have to pay income tax on up to 50% of your benefits. If you earn more than $34,000, up to 85% of your benefits may be taxable. For joint filers, if you and your spouse have a combined income that is between $32,000 and $44,000, you may have to pay income tax on up to 50% of your benefits. If your combined income is more than $44,000, up to 85% of your benefits may be taxable.
In addition to paying federal income tax on your benefits, Kahn noted that 12 states also levy income tax on Social Security benefits: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont and West Virginia.
If youre worried about your tax bill in retirement, its a good idea to speak with a professional who can help you find ways to lower your taxable income.
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Let Your Family In On Your Social Security Benefits
In addition to your spouse, your minor children who are biological, step- or adopted can receive payments that amount to one-half of your full allocation on a monthly basis. Each individual needs to fit certain parameters to receive these benefits. There is also a limit to the amount your family members can claim based on a workers earnings record. This is also known as a family benefit maximum . This maximum only applies when there are multiple-payment recipients on one record.
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When Should You Start Collecting Social Security Benefits
To determine when you should start taking your benefits, its important to understand how much your check is affected by when you claim your benefit. As mentioned before, you can claim your benefit as early as age 62, but reaching full retirement age can secure your full benefit.
So when exactly is full retirement age? That depends on when you were born.
|Year of birth|
|65 + 2 months for each year past 1937|
|66 + 2 months for each year past 1954|
|1960 and later||67|
While the full retirement age used to be 65, changes to the program have increased that age. For example, those born in 1955 now have to wait an extra two months beyond age 66 to claim their full benefit. Someone born in 1959, for example, would have to wait until age 66 and 10 months to get the full benefit. Anyone born in 1960 or later, receives their full benefit at 67.
But some retirees choose to wait even longer. You may wait until as late as age 70 to claim your benefit, but then you must take it. Youll receive a bigger check for doing so.
So what is the upside to delaying your Social Security benefit after age 62? Your check wont get hit by a serious benefit reduction. Heres how much a $1,000 monthly check will become if you claim your benefit as soon as youre eligible at age 62.
|Year of birth||If you file at 62, benefit reduced by:||A $1,000 check becomes|
You Can Claim Social Security Benefits Earned By Your Ex
Just because you’re divorced doesn’t mean you’ve lost the ability to get a Social Security benefit based on your former spouse’s earnings. You can receive a benefit based on his or her record instead of a benefit based on your own work record if you were married at least 10 years, you are 62 or older, and you are single.
Like a regular spousal benefit, you can get up to 50% of an ex-spouse’s benefit — less if you claim before full retirement age. And the beauty of it is that your ex never needs to know because you apply for the benefit directly through the Social Security Administration. Taking a benefit on your ex-spouse’s record has no effect on his or her benefit or the benefit of your ex’s new spouse. And unlike a regular spousal benefit, if your ex qualifies for benefits but has yet to apply, you can still start collecting Social Security based on the ex’s record, though you must have been divorced for at least two years.
Note: Ex-spouses can also take a survivor benefit if their ex died after the divorce, and, like any survivor benefit, it will be worth up to 100% of what the ex-spouse received. If you remarry after age 60, you are still eligible for the survivor benefit.
A claiming strategy if youre divorced: Exes at full retirement age who were born on January 1, 1954, or earlier can apply to restrict their application to a spousal benefit while letting their own benefit grow.
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Work At Least The Full 35 Years
The Social Security Administration calculates your benefit amount based on your lifetime earnings. The SSA adjusts your earnings, indexing them in order to take into account changes in average wages since the years you received those earnings. Then the SSA totals your earnings from your 35 highest-earning years and uses an average indexed monthly earnings formula to come up with the benefit you will receive at your full retirement age.
If you entered the workforce late or had periods of unemployment, those years will count as zeroes, which will be included in the formula, bringing down the average. Once you have worked 35 years, each additional year of earnings will replace an earlier year of lower earnings, which will increase the averageand hence, your benefit.
These Five Strategies Will Help You Get What You Deserve From America’s Top Social Program
Seniors are expected to have a lot on their plates when they retire. Once they move on from their careers, they’ll have to lean on their retirement savings and a number of social programs to make ends meet. One of these programs, Social Security, projects as a major player for the financial well-being of our nation’s elderly.
According to two separate Gallup surveys conducted in April 2018, the percentage of existing retirees leaning on Social Security in some capacity to make ends meet was tied for a 16-year high. Meanwhile, the 84% of nonretirees who expect to be at least somewhat reliant on Social Security income during their golden years was tied for a 15-year high. Social Security’s importance isn’t waning, which means you’ll want to get as much out of the program as you can.
How, exactly, do you do that? Here’s are five ways to make sure you get what you deserve.
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Next Steps For Retired Americans
The Guaranteed 3% COLA for Seniors Act is one critical way for Congress to help Americas retirees. Current cost-of-living adjustments are decided annually. Yet, they fall short of actual cost of living increases.
A permanent, 3% increase would treat seniors with the fairness they have earned. With recent low or missing COLAs over recent years, this legislation should be retroactive to 2010. This will compensate seniors for the low or missing COLAs they have endured.
If you agree to a permanent, 3% COLA, its easy to make your voice heard. Sign our Benefit Reimbursement Petition to Congress. Help NORA lead the way to fair financial treatment for Americas seniors!
NORA leads the fight for a permanent 3% COLA for seniors. Help us spread the word while by following us at and !
Simple Strategies To Maximize Your Benefits
Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas’ experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning.
Kirsten Rohrs Schmitt is an accomplished professional editor, writer, proofreader, and fact-checker. She has expertise in finance, investing, real estate, and world history. Throughout her career, she has written and edited content for numerous consumer magazines and websites, crafted resumes and social media content for business owners, and created collateral for academia and nonprofits. Kirsten is also the founder and director of Your Best Edit find her on LinkedIn and Facebook.
When Social Security was introduced in 1935, it was never intended to be a primary income source that could support people in retirement. Rather, its sole purpose was to provide a safety net for people who were unable to accumulate sufficient retirement savings. For the next several decades, the majority of Americans never gave much thought to their Social Security because of shorter lifespans and reliance on guaranteed pensions.
Things are very different today.Social Security planning is now a vital element in securing income sufficiency in retirement and there are strategies to maximize your benefits.
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When In Doubt Consider A Do
Last, but not least, when in doubt, consider Social Security’s under-the-radar mulligan: Form SSA-521. Officially known as the “Request for Withdrawal of Application” by the Social Security Administration, Form SSA-521 allows an individual who meets certain criteria to undo their claim. As long as the SSA approves the claim, it’ll be as if benefits were never paid, and your payout will once again return to growing by 8% with each year, up until age 70.
Those “certain criteria” are as follow: First, you only have 12 months from first receiving benefits to file for this mulligan, so you’ll have to decide pretty quickly if you regret your claiming decision. And secondly, you’ll need to repay every cent you received from the Social Security program before your claim is undone.
This mulligan can be particularly handy for baby boomers who were forced into an early claim due to unemployment, but who land a well-paying job within 12 months of first receiving benefits. Undoing their claim would then allow their payout to continue growing, all while using their work wages to make ends meets.
That, folks, is a road map to getting the most out of Social Security.
Change In How You Report Earnings
The Social Security Administration bases its benefit calculations on earnings reported on W-2 forms and on self-employment tax payments. Most individuals are not required to send in an estimate of earnings.
However, the Social Security Administration does request earnings estimates from some recipients: those with substantial self-employment income or those whose reported earnings have varied widely from month to month, including people who work on commission. Toward the end of each year, Social Security sends those people a form asking for an earnings estimate for the following year. The agency uses the information to calculate benefits for the first months of the following year. It will then adjust the amounts, if necessary, after it receives actual W-2 or self-employment tax information in the current year.
Once a beneficiary reaches full retirement age, his or her income will no longer be checked. Because there is no Social Security limit on how much a person can earn after reaching full retirement age, there is nothing to report.
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You Can Undo A Social Security Benefits Claiming Decision
There aren’t many times in life you can take a mulligan. But Social Security offers you the chance for a do-over. Let’s say you claimed your benefit, but regretted the decision and wished you had waited. Within the first 12 months of claiming Social Security benefits, you can withdraw the application. You will need to pay back all the benefits you received, including any spousal benefits based on your record. But you can later restart your Social Security benefits at the higher amount youll earn by waiting.
Early claimers have another opportunity for a do-over: They can choose to suspend their Social Security benefit at full retirement age. Say you took your benefit at age 62. Once you turn full retirement age, you can suspend your benefit. You don’t have to pay back what you have received, and your benefit will earn delayed retirement credits of 8% a year. Wait to restart your benefit at age 70, and your monthly payment will get up to a 32% boost — which could erase much of the reduction from claiming early.
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%.
Delay Claiming Social Security Benefits
The simplest way to increase your monthly payments is to delay claiming Social Security benefits. The Social Security Agency allows all Americans to start benefits at the early retirement age of 62, but doing so can reduce your monthly payment paycheck.
If you choose to begin receiving Social Security early, for each month there is between when you start and your full retirement age you lose about half a percentage point of the total value you would have earned if youd waited.
You could miss out on up to 30% of the monthly payment youd be entitled to at your full retirement age by starting early. If you would receive a monthly benefit of $1,500 at your full retirement age of 67, for instance, starting benefits early at age 62 would reduce that amount to $1,050.
Waiting to start Social Security benefits until after your full retirement age can boost your monthly benefit. According to Eric D. Brotman, CEO of BFG Financial Advisors, there is an 8% annual increase in benefits due for each year you wait from full retirement age through 70.
That means the $1,500 benefit at age 67 could increase by 24% to $1,860 per month if you wait until 70thats the age at which you must begin payments. Just dont wait until after age 70 to start payments.