You Can Receive Medicare Without Taking Your Social Security Benefits
Medicare provides both free and cost-effective health insurance coverage for eligible older adults who are 65 years of age or older. Social Security retirement benefits act as a small pension, providing monthly income to those eligible as early as age 62.
Even if you are eligible to start receiving benefits, you do not have to start taking them. In some cases, it may be better to delay or to start taking benefits from one program but not the other.
At What Age Is Social Security No Longer Taxed
At 65 to 67, depending on the year of your birth, you are at full retirement age and can get full Social Security retirement benefits tax-free. However, if youre still working, part of your benefits might be subject to taxation. The IRS adds the figures for your earnings and half your Social Security benefits.
Be As Accurate As Possible
Above all, be as accurate as possible when filling out the application. Pay; attention to details and review your answers. Compare documents with the completed information. When applying online, you will have a chance to make changes before hitting the submit button. There is no need to mail the application. It can be easily and securely submitted online. Be sure to print the receipt and keep it with other important records.
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Your Social Security Checklist
Dont underestimate the power of your Social Security benefit. Its an important part of your retirement.
But Social Security was never meant to be a catchall retirement program. Its built to replace only about 40% of income. Youre going to need other income sources to complete your retirement income picture.
Heres your social security to-do list:
Dont look for advice from agents at the Social Security administration office. They will give you the facts, but they are not allowed to tell you whats best for your situation. You also dont want to get advice from anyone who offers a one-size-fits all solution. If someone tells you, Always file early, or Always delay, dont take their advice. You dont want to blindly trust advice either.
Its best to understand the basics of Social Security for yourself so you can feel confident about the best age to apply. This is your retirement after all.
If you want Social Security advice that takes your whole financial life into account, you can schedule a call with one of our advisors and start the process: Schedule a call. Ready to meet with us virtually or in person? Schedule a meeting here.
More to explore
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.
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What Is The Future Of Social Security
If youre skeptical about the;future of Social Security;or wary of potential changes such as means testingwhich could reduce or eliminate benefits for the wealthy, or an increase in the full retirement ageyou may be tempted to start benefits early, under the assumption that its better to have something than nothing.;The;2020 annual report;from the Social Security Trustees, released in April, projects that the Social Security Trust Fund has enough resources to cover all promised retirement benefits until;2035,;and will cover 79% of scheduled benefits for new retirees thereafter without changing the current system. The 2020 report does not include an adjusted projection due to impacts, if any, from the pandemic.
Over the longer term, changes such as later benefit dates or means testing may be considered.
In any situation, if youre particularly concerned about the future prospects for Social Security, thats a good reason to save more, and earlier, for your retirement.
Three Easy Ways To Apply For Benefits
There are three easy ways to apply for Social Security. The first and easiest way to apply is online. The online application saves time and is very efficient. The entire process should take no more than 15-30 minutes. Second, you can schedule an appointment to visit the local office. This is the best way if youre not comfortable on the computer. Third, the entire process can also be handled on the phone. Call 1-800-772-1213. No matter how you apply, gather the required information ahead of time.;
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Apply For A Cpp Retirement Pension
While applying, you may now:
- add a federal voluntary tax deduction
- request to receive your tax slips online, rather than by mail
- request the child-rearing provision
You will not be able to apply online if:
- you are not, at least 1 month past your 59th birthday
- you are receiving a CPP retirement pension
- you have already applied for the CPP retirement pension and Service Canada is assessing your application
- you are or were receiving a CPP disability benefit
- you were receiving a benefit that was paid to a designated third party
- you live outside of Canada
- you only have QPP contributions
- you are a CPP and QPP contributor residing in Quebec
- you have an authorized third party on your account
If any of the above applies to you, you will need to :
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Benefit Increasesthe Power Of Social Security
The most important part of Social Security is that the benefit increases each year. This is called a COLA
Many people choose an age to apply for social security, but dont account for the COLA. This is a big mistake.
The COLA is powerful because it protects your income from inflation. Think about how much you made twenty or thirty years ago. Could you live off of that today? What were house prices back then? What about gas or cheeseburger prices?
The average retirement lasts twenty to thirty years. On top of that, medical costs tend to increase faster than other types of costs. And we all know medical costs become more important later in life. This is why its important to have inflation protection on your income. And thats exactly what Social Security offers.
Each year the benefit goes up a little bit based on the CPI-W, which is a measure of inflation. The CPI-W differs slightly from the regular CPI by measuring inflation costs for urban workers. HIstorically, its been slightly higher than the standard CPI, which is a good thing, but there is talk of changing it to the standard CPI in the future.
Heres a chart showing the power of the COLA. In this example, you have a monthly benefit of $3,000 claimed at a full retirement age of 67, and an average COLA of 2% per year.
Not bad. This is why filing at the right time is so important.
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What If The Trust Fund Runs Out
If the trust fund runs out, the current projections according to the Social Security Trustees report is that enough taxes will be collected to pay 7879% of promised benefits.
This raises the question, Should we take our benefit early to lock it in? But taking benefits early will not exempt you from a cut if the trust fund is depleted. The current law is that the cut is across the board, which means every benefit will be cut by 2122% whether you are currently receiving benefits or not. Congress would have to pass a bill to change this.
From what we know currently, the above seems to be the worst-case scenario. It assumes that Congress, instead of stepping up to the plate and agreeing on reform, decides not to take action. We do know that there has been a bi-partisan committee established to work on solutions to the issue, but no bills have been drafted at this time to propose for debate.
In fact, as of December 2020, the trust fund is still increasing. 2020 results:
- Total income: $1.118 trillion
- Net increase in assets: $ 11 billion
Spouses Who Dont Qualify For Their Own Social Security
Spouses who didnt work at a paid job or didnt earn enough credits to qualify for Social Security on their own are eligible to receive benefits;starting at age 62 based on their spouses record. As with claiming benefits on your own record, your spousal benefit will be reduced if you take it before reaching your FRA. The highest spousal benefit that you can receive is half of the benefit that your spouse is entitled to at their FRA.
While spouses get a lower benefit if they claim before reaching their own FRA, they will not get a larger spousal benefit by waiting to claim after their FRAsay, at age 70. However, a nonworking or lower-earning spouse may get a larger spousal benefit if the working spouse has some late-career, high-earning years that boost their benefits.
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No More File And Suspend
Note that the claiming strategy called file and suspend, which allowed married couples who have reached their FRA to receive spousal benefits and delayed retirement credits at the same time, ended as of May 1, 2016. However, spouses born before Jan. 2, 1954, who have attained their FRA may still be able to file a restricted application. It allows them to claim spousal benefits while delaying their own benefits up to age 70.
Social Security benefits can be taxable if your combined income is high enough.
What If I Take Benefits Early
If you choose to receive your Social Security check up to 36 months before your full retirement age, be aware that your benefit is permanently reduced by five-ninths of 1% for each month.
If you start more than 36 months before your full retirement age, the benefit is further reduced by five-twelfths of 1% per month, for the rest of retirement.
For example, lets assume that you stop working at age 62. If your full retirement age is 66 and you elect to start benefits at age 62, the reduced benefit calculation is based on 48 months. This means that the reduction for the first 36 months is 20% and 5% for the remaining 12 months. Overall, your benefits would be permanently reduced by 25%.
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Social Security Benefits For Workers Turning 60 In 2020 Will Very Likely Drop Due To The Coronavirus Pandemic
As a result of the COVID-19 pandemic, about 3 million retired workers who turn 60 years old in 2020 will very likely have much lower lifetime Social Security benefits than previously expected. Without legislative changes, the average earner stands to lose nearly $1,500 per year for the rest of their life. Fortunately, there is a simple legislative changeexplored in detail belowthat would fix these problems without lowering the benefits of any other cohort of retirees. Chairman of the U.S. House Ways and Means Social Security Subcommittee, Rep. John Larson , has introduced such legislation*and Congress should fix this situation as soon as possible.
Report The Death Of A Social Security Or Medicare Beneficiary
You must report the death of a family member receiving Social Security or Medicare benefits. The Social Security Administration processes death reports for both. Find out how you can report a death and how to cancel benefit payments. In addition to canceling SSA and Medicare benefits, find out what other benefits and accounts you should cancel.;
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Make Payments To The Federal Government
Learn how to use Pay.gov to make secure, electronic payments to government agencies from your checking or savings account. You can use the online service for VA medical care copayments, U.S. district court tickets, U.S. Coast Guard;merchant mariner user fee payments, and more.
If you need help, contact Pay.gov customer service.;
What If I Change My Mind
If you receive Social Security benefits at a reduced rate, but then change your mind, you have the option of withdrawing your application and paying back to the government what youâve already received . Then, you could restart benefits at a later date to take advantage of a higher payout. But you are limited to one withdrawal per lifetime.
For example, letâs say you elected to receive early benefits at age 62, but then decided to go back to work at age 63. You could withdraw your Social Security application within the first 12 months of receiving benefits, pay back the years worth of benefits you received, go back to work, and then wait until a later age to restart your benefit checks at a higher level.
For important details about repaying benefits please read the SSA publication If You Change Your Mind.
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What To Consider When Deciding The Best Age For Social Security Benefits
Youll receive reduced monthly benefits permanently if you start taking them before you reach full retirement age. And the reductions arent small. This breakdown summarizes how much you can lose depending on when you get your retirement benefits:
- Benefits are reduced by 30% if you opt to start receiving benefits just five years early.
- If you wait until you full retirement age youll receive 100% of your benefits.
- You can also elect to postpone benefits beyond full retirement age, up until you are 70.
- The monthly amount you will receive in the future increases each month you wait to start receiving benefits.
- If you can wait until the last possible month, your check will be 132% of the full retirement benefit.
For a fuller comparison, this table from the Social Security Administration shows how much you could get if you retire at age 62 based on your birth year:
|Social Security Administration Early Retirement at Age 62|
So, its almost always best to delay Social Security benefits for as long as you can. If you plan to work in retirement, youll definitely want to delay. Youll face a penalty if you continue to work after you claim early retirement benefits and earn more than the yearly earnings limit, which for 2020 is $18,960. This means that the Social Security Administration will deduct $1 from benefits for every $2 that you earned over $18,960.
When To Apply For Social Security
As stated above, you are eligible to apply for Social Security retirement benefits when you are 61 and nine months. You can start collecting benefits as soon as you turn 62.
However, just because you can, does not mean that you should.
The longer you delay starting your benefits, the more your monthly income will be. In fact, the difference in lifetime income between starting at age 62 and waiting until your maximum retirement age can be more than $100,000 and for many people much much more.
While you can start benefits at age 62, the Social Security Administration considers that early. Depending on your birth year, you do not reach what the SSA calls full retirement age until sometime between ages 66 and 67.
- For every month prior to your full retirement age that you begin taking benefits, around 0.55% is deducted from your payout.
- And, for every year that you defer your benefits, you will receive a larger amount when you finally do begin drawing Social Security. The amount of the bonus is dependent, once more, on your birth date. For example, someone born in 1944 has a full retirement age of 66. If they start benefits at age 69, they will receive eight percent more benefits for each year they delay.
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How To Receive Federal Benefits
To begin receiving your federal benefits, like Social Security or veterans benefits, you must sign up for electronic payments with direct deposit.
If You Have a Bank or Credit Union Account:;
If You Donât have a Bank or Credit Union Account:;
- Direct Express debit card;- a pre-paid debit card. Get help by calling the Go Direct Helpline at .;
Make Changes to an Existing Direct Deposit Account:
Learn how to make changes to an existing direct deposit account. You also may contact the federal agency that pays your benefit for help with your enrollment.
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, 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 disappears, 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%.
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