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How To Start Drawing Social Security

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When To Start Receiving Retirement Benefits

When You Should Start Drawing On Social Security

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.

I Have Some Savings Should I Live On That Rather Than Claim Social Security Now

This is a very personal decision that depends greatly on your circumstances. Maintaining an emergency fund is always important, and never more so than during times of economic volatility. But people with very substantial savings can draw down safely to cover living expenses while delaying their claim.

The loss of earned income means you will be in a lower tax bracket, and rates are at historically low levels under the Tax Cuts and Jobs Act of 2017.

Theres no better time to take money out of a 401 or I.R.A. than when your income is relatively low and you have a lower marginal tax rate, Mr. Finke said.

A delay of just a few years can be very beneficial. A 62-year-old with a full retirement age benefit of $1,500 would increase her likely lifetime benefits by more than $100,000 by waiting until that point to file, according to a projection by William Meyer, a co-founder of Social Security Solutions, which offers software aimed at helping retirees make optimal claiming decisions. Mr. Meyers calculation assumes that our retiree lives to 90 and that Social Securitys cost-of-living adjustment is 2 percent each year.

But the pandemic has added a new dimension to claiming decisions for most retirees, the retirement researcher Dirk Cotton said. Since most Americans have modest savings, if any, many of them will need to hang on to what they have.

Persistent bear market conditions also present an argument in favor of an early claim, Mr. Cotton added.

Tax Considerations For Social Security Benefits

How do these tax considerations affect when you should apply for Social Security benefits? At todays , they may not have much of an impact on most people. Still, tax rates and income thresholds can change, so its worth remembering that you will lose less of your Social Security to taxes if you are in a lower marginal tax bracket when you begin to collect.

You should also note that if you decide to return to work, even part-time, and arent yet at your FRA, your Social Security benefits may be temporarily reduced. The reduction is $1 for every $2 of earned income over $18,960 in 2021 . During the year when you reach your FRA, your benefits will be reduced by $1 for every $3 in income over $50,520 in 2021 until the month when you become fully eligible. That money isnt lost, however. The SSA will credit it to your record when you reach your FRA, resulting in a higher benefit.

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What Happens If You Claim After Your Fra

If you wait until your age 70 to start claiming benefits, then youll get an extra 8% per yearor, in total, 132% of your primary insurance amount for the rest of your life. Claiming after you turn 70 doesnt increase your benefits further, so theres no reason to wait longer than that.

The longer you can afford to wait after age 62 , the larger your monthly benefit will be. Nevertheless, delaying benefits doesnt necessarily mean that youll come out ahead overall. Other factors should be considered, including your expected longevity and whether you plan to file for spousal benefits. You should also consider the tax, investment opportunity, and health coverage implications.

Work For At Least 35 Years

Age to Start Drawing Social Security

The Social Security Administration uses your 35 highest-earning years to calculate your primary insurance amount , which is the monthly benefit amount you receive as of your full retirement age. If youve worked fewer than 35 years, Social Security uses zeroes in the calculation for the non-earning years.

That means beneficiaries with fewer than 35 years of income can make a big difference in the size of their benefit by continuing to work and getting some of the zeroes replaced with positive income numbers.

Brotman also suggests strategically increasing your yearly income, if possible, to help maximize your future benefits.

The first $142,800 of income is subject to Social Security taxation and also used to calculate future benefits, he notes. If you are earning less than that figure, consider a second job or side hustle to increase your contributions into the system and youll be setting yourself up for a larger future benefit.

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Is Social Security Based On The Last 5 Years Of Work

Social Security benefits are based on your lifetime earnings. Your actual earnings are adjusted or indexed to account for changes in average wages since the year the earnings were received. Then Social Security calculates your average indexed monthly earnings during the 35 years in which you earned the most.

The Best Age For Social Security Retirement Benefits

As you get older, you start thinking more about retirement distributions than contributions. One of the biggest questions that near-retirees have is, What is the best age to start collecting Social Security benefits? Most take the benefits right away, but that isnt always the best option. A financial advisor can help you optimize a plan for your retirement needs. You can start collecting Social Security benefits any time between ages 62 and 70. Lets take a look at how Social Security works, and what you need to know when deciding the best age for your retirement.

The best age for Social Security benefits depends on personal and financial factors, like your current cash needs, retirement plans, health and family history. Be sure you weigh the decision carefully and dont hesitate to find a financial advisor to talk to if need be. The age you choose to start taking Social Security will affect the monthly amount you receive for the rest of your life.

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Maximizing Your Social Security Benefit

Each year you delay collecting Social Security between ages 62 and 70 increases your payout by about 8 percent.

Here’s a short rundown of the pros and cons of various claiming strategies:

Claiming at age 62

THE CASE FOR ITIf your spouse dies and you take the survivors benefit before your full retirement age, you’ll collect benefits for a longer period of time.

THE CASE AGAINST ITIf you take the survivors benefit before your full retirement age, the benefit is likely to be reduced by up to 29 percent.

Bottom lineLook before you leap. Each person’s situation is different so the decision to take the benefit early is a personal one.

Full Retirement Age: Age 6567 Depending On Date Of Birth

New tool can help you decided when to start drawing Social Security

Your full retirement age is determined by your day and year of birth, and it is the age in which you get your full amount of Social Security benefits. For every year you delay taking your benefits from full retirement age up until you turn 70, your benefit amount will increase by almost 8% a year. It is referred to as a delayed retirement credit. This increase can result in more lifetime income for you and your spouse. Even after factoring in a potential return on investment and the monthly benefits you could have received if you claimed early, there can still be a $50,000$100,000 increase in lifetime benefits by waiting until you are older.

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Can I Collect Social Security And Work Full Time

You can get Social Security retirement or survivors benefits and work at the same time. But, if youre younger than full retirement age, and earn more than certain amounts, your benefits will be reduced. Your benefit will increase at your full retirement age to account for benefits withheld due to earlier earnings.

How And When To Apply For Social Security Benefits

    • B.S., Texas A& M University

    Applying for Social Security benefits is the easy part. You can apply online, by telephone or by walking into your local Social Security office. The hard part is deciding when to apply for your Social Security retirement benefits and rounding up all the documents you’ll need when you do.

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    Get Your Social Security Estimates

    The SSA website provides estimates for how much you’ll collect if you start receiving benefits at age 62, your full retirement age , and age 70. Remember that you don’t have to start taking your benefits at those milestone ages you and your spouse can start collecting anytime between ages 62 and 70.

    What Is The Maximum Amount You Can Earn While Collecting Social Security In 2020

    What Age Should You Start Drawing Social Security ...

    The Social Security earnings limits are established each year by the SSA. For 2020, those who are younger than full retirement age throughout the year can earn up to $18,240 per year without losing any of their benefits. After that, you ll lose $1 of annual benefits for every $2 you make above the threshold.

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    You Can Begin Drawing Social Security At Age 62

    You can start drawing Social Security retirement benefits at age 62, but that may not be the best financial move. Thats because your monthly benefit amount increases with each year you wait to sign up for Social Security. Begin drawing benefits at 62, and your benefit could be reduced by as much as 30%.

    If you begin receiving Social Security benefits at 62, the only increase youll see in your monthly check after that is a tiny cost-of-living adjustment annually. For example, the cost-of-living increase for 2021 is 1.3%, which would add only about $20 to a $1,500 monthly benefit.

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    How Much Can You Expect To Get

    Your Social Security retirement benefit payment is based on how much you made during your working years. The more you earned, the more you’ll get when you retire.

    Your Social Security retirement benefit payment is also affected by the age at which you decide to retire. You can retire as early as age 62, but if you retire before your full retirement age, your benefits will be permanently reduced, based on your age. For example, if you retire at age 62, your benefit would be about 25 percent lower than what it would be if you waited until you reach full retirement age.

    You also need to remember that monthly premiums for Medicare Part B are usually deducted from monthly Social Security benefits. Retirement is a great time to look into the pros and cons of a private Medicare Advantage plan.

    Retirement benefits are based on the recipients lifetime earnings in work in which they paid Social Security taxes. Higher income translates to a bigger benefit, up to a point. The amount to which retirees are entitled is modified by other factors, most crucially the age at which they first claim benefits.

    For reference, the estimated average Social Security retirement benefit in 2021 is $1,543 a month. The maximum benefitthe most an individual retiree can getis $3,148 a month for someone who files for Social Security in 2021 at their full retirement age.

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    The Source Ofand Solution Tothe Problem

    When the current Social Security formula was put in place in 1977, no provision was made for the contingency that economic conditions would be so dire that average wages would fall in any given year. This problem first surfaced in 2009 during the Great Recession. The AWI, however, fell by a relatively small amount, and policymakers chose not to do anything about it. As a result of the COVID-19 pandemic, however, the decline in the AWI is likely to be about four times as big now as it was during the Great Recession.

    There is ample precedent for fixing this problem. The first precedent concerns Social Security cost-of-living allowances . As mentioned above, payments in years after beneficiaries first year of retirement are indexed to inflation using a version of the consumer price index . However, under the law, if prices fall in any year, benefits are not adjusted downward rather, they remain the same. The second precedent concerns the Social Security contribution and benefit base, also known as the taxable maximum. The taxable maximum is the dollar amount of annual earnings above which the Social Security payroll tax does not apply. The taxable maximum is indexed to the AWIbut like COLAs, it is never adjusted downward.

    You Could Help Keep Your Tax Bill Lower

    When to start drawing Social Security-take it as early as age 62 #socialsecurity #ssdi #62

    Many people dont realize that they could end up paying federal income taxes on as much as 85% of their Social Security benefits.

    If you file a federal tax return as an individual and your provisional income is between $25,000 and $34,000, then up to 50% of your benefits may be federally taxable as earned income. If your provisional income is more than $34,000, you may have to pay federal income taxes on up to 85% of your Social Security benefits.

    If you file a joint return and you and your spouse have a provisional income between $32,000 and $44,000, up to 50% of your Social Security benefits could be taxed. If your provisional income with your spouse is more than $44,000, up to 85% of your Social Security benefits may be taxable.

    If you dont have much taxable income in retirement, you may not have to pay any federal taxes on your Social Security benefits. But if youre like many Baby Boomers you may have a hefty amount of your retirement savings in tax-deferred IRAs or 401s and the federal income taxes on those savings could be substantial.

    To help with that, you may be able to take distributions from your tax-deferred accounts , etc.) now, and perform some Roth conversions, and/or perhaps conversions to other vehicles that can provide you with tax-free income, such as life insurance, so that Social Security benefits later may not be taxed at all by the federal government.

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    Know Your Full Retirement Age

    Reaching full retirement age is often a factor people examine to decide when to take Social Security benefits. While the full retirement age used to be 65 for everyone. Now the age which that occurs varies depending on the year you were born.

    Anyone born in 1950 or earlier is already at full retirement age based on the Social Security Administrations definition. For individuals born between 1951 and 1954, 66 is the normal retirement age.

    Starting in 1955, the full retirement age scales up in 2-month increments. For example, those born in 1955 qualify at age 66 and two months. If you were born in 1958, you have to wait until age 66 and eight months to be eligible for full retirement benefits. Anyone born in 1960 or later reaches full retirement age when they turn 67 years old.

    Heres an overview of when people reach full retirement based on their birth year:

    Birth Year
    Already at full retirement age
    1951-1954
    1960 or later67

    Choosing to draw Social Security before or after the ages above impacts your benefit. Before you select a different age to start, you need to know how it affects your retirement.

    Working While Collecting Social Security Retirement

    Many people choose or need, to keep working after claiming Social Security retirement benefits. However, if you continue work after claiming early retirement benefits your Social Security benefits may be reduced until you reach your full retirement age.

    If you retire at age 62, Social Security will deduct money from your retirement check if you exceed a certain amount of earned income for the calendar year. For example, the income limit in 2018 was $17,040 or $1,420 per month. The income limit increases annually. Until you reach your full retirement age, Security will reduce your benefit by $1 for every $2 you earn over the income limit. Once you reach your full retirement age, you will receive your full Social Security retirement benefit with no limitation on how much income you earn from working.

    The worse news is that Social Security does not apply the early retirement work penalty by simply deducting a small amount from each monthly benefit check. Instead, the agency may withhold several months entire checks until the total reduction is paid off. This means your annual budget will have to account for a certain number of months without a benefit check. Complete details on this decidedly complicated process can be found in Social Securitys pamphlet on How Work Affects Your Benefits. You can also use Social Securitys earnings test calculator to see how much your reduction will be and when your checks will be withheld.

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