Monday, May 16, 2022

What Age Do You Get Your Full Social Security Benefits

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Chapter : How Are Social Security Survivor Benefits Calculated

7 GOOD REASONS to File for Social Security Benefits at Age 62

When a worker pays into the Social Security system over the course of their life, they accumulate credits. A worker can receive up to four credits a year. For example, in 2020, workers will receive one credit for every $1,410 they earn. When your spouse has earned $5,640, they have earned their four credits for the year.

In order to claim retirement, a worker needs 40 credits. However, the number of credits required to provide survivor benefits for the workers family depends on the workers age when they die. This means that the younger a person is when they pass away, the fewer credits they will need for their family members receive survivor benefits.

When someone retires, or when they die, the amount of their benefit is calculated based on their earnings over their lifetime. This is the amount that survivors will receive all or part of. To calculate their benefit, Social Security adds up the workers income during the years they made the most money. They then index that total against average wages across the country during those years. This results in the workers Average Indexed Monthly Earnings . The Social Security Administration only includes the portion of a workers income up to the maximum taxable earnings limit. This is the amount that is taxed for Social Securityin 2020, thats $137,700. If your spouse earned more than that, the higher earnings will not be included in the calculation because these monies were not taxed by Social Security.

Did you Know?

If You Have Lived In Canada Less Than 40 Years

Not everyone receives the full Old Age Security pension. The amount you receive depends on the number of years you have lived in Canada.

If you lived in Canada for less than 40 years you will receive a partial payment amount. Your payment amount is based on the number of years in Canada divided by 40.

You can delay your first payment up to 5 years to get a higher amount.

Example

If you lived in Canada for 20 years

If you lived in Canada for 20 years after age 18, you would receive a payment equal to 20 divided by 40, or 50%, of the full Old Age Security pension.

Full Retirement Age: Age 6567 Depending On Date Of Birth

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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Early Benefits Can Still Pay Off

However, taking early benefits can still pay off despite the reduced monthly check. But youll want to be sure you budget for a reduced benefit.

No one can predict how long youll live, but if youre facing a potentially significant reduction in life expectancy and are short of income, taking Social Security early may be appropriate, says Neiser.

Married women are also good candidates for claiming early benefits because they are likely to outlive their husbands. Those widows then become eligible to receive the greater of either their benefit or their late husbands benefit.

However, this scenario works only if the husband does not claim his benefits early. By not claiming early benefits, the husband effectively increases the monthly benefit his wife eventually receives. So youll want to calculate how filing early will affect your spousal benefit here.

Watch Out For Hidden Costs

Your 2016 guide to Social Security benefits

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.

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Bridge To Medicare At Age 65

Remember that while you are eligible for reduced Social Security benefits at 62, you won’t be eligible for Medicare until age 65, so you will probably have to pay for private health insurance in the meantime. That can eat up a large chunk of your Social Security payments.

Read Viewpoints on Fidelity.com: Your bridge to Medicare

If You Were Born Between 1943 And 1954 Your Full Retirement Age Is 66

You can start your Social Security retirement benefits as early as age 62, but the benefit amount you receive will be less than your full retirement benefit amount.

The chart below provides examples of the percentage of your full retirement benefit amount you and your spouse would receive from age 62 up to your full retirement age.

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Collecting Social Security Before Or After Your Full Retirement Age

If you begin collecting Social Security at age 62 and your full retirement age is 66, the check you receive will be about one-quarter less than the amount you would have received at full retirement age. If you are the sole breadwinner in your household, your spouse could be negatively affected as well. If you begin collecting before your full retirement age, the amount of money your spouse would receive after your death decreases.

Can I Get Social Security If I Work

What’s the Best Age to Claim Social Security 62, 66, or 70?

Yes, you can receive Social Security benefits while you are still working. If youve reached full retirement age, you can work and earn as much as youd like and receive full benefits. If youre under full retirement age, your benefits will be reduced temporarily. The money is not lost, however. Social Security will credit it to your record when you reach full retirement age, resulting in a higher benefit.

The reduction is $1 for every $2 of earned income over $18,960 in 2021 for those younger than full retirement age. During the year when you reach full retirement age, your benefits will be reduced by $1 for every $3 in income over $50,520 in 2021. That continues until the month when you become fully eligible.

Retirees can contribute to individual retirement accounts as long as they have earned income. However, Social Security benefits are not considered earned income for this purpose.

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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 you’ve 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, let’s 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.

Survivors Benefits If You Are Divorced

An ex-spouse is eligible to receive the same benefits as a current spouse if they were married to the deceased worker for at least 10 years and are not currently married. However, if the living ex-spouse remarries before age 60, they forfeit their right to their deceased former spouses Social Securityunless that subsequent marriage ended in death, divorce, or annulment. If the living ex-spouse remarries after age 60, this rule doesnt apply.

How much a spouse or former spouse receives depends on several factors including when they file for benefits and whether they are still working and earning money.

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Have You Thought About Your Longevity

Is it better to take reduced benefits at age 62 or full benefits later? The answer depends, in part, on how long you live. If you live longer than your “break-even age,” the overall value of your retirement benefits taken at full retirement age will begin to outweigh the value of reduced benefits taken at age 62.

You’ll generally reach your break-even age about 12 years from your full retirement age. For example, if your full retirement age is 66, you should reach your break-even age at 78. If you live past this age, you’ll end up with higher total lifetime benefits by waiting until full retirement age to start collecting. However,unless you’re able to invest your benefits rather than use them for living expenses, your break-even age is probably not the most important part of the equation. For many people, what really counts is how much > they’ll receive each month, rather than how much they’ll accumulate over many years.

Of course, no one can predict exactly how long they’ll live. But by taking into account your current health,diet, exercise level, access to quality medical care, and family health history, you might be able to make a reasonable assumption.

Chapter : Who Is Eligible For Survivor Benefits From Social Security

Social Security Retirement Benefits
  • A widow or widower age 60 or older who was and did not remarry before age 60
  • A surviving divorced spouse who was married to the deceased for at least 10 years
  • A widow or widower of any age caring for the deceaseds child who is under 16 or disabled and receiving benefits on their record
  • An unmarried child of the deceased who is: younger than age 18 or age 18 or older with a disability that began before 22
  • Parents of the deceased worker who are 1) at least 62 2) were dependent on the deceased for at least half of their income, and 3) whose own Social Security benefit is not larger than that of their deceased child

Did you Know?

If you were married to the deceased for at least9 months, you could be eligible for survivors benefits.

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Make Sure You Work At Least 35 Years

Social Security uses a standard formula to set benefits, which is based on average wages in your 35 highest earning years.

While a 10-year work history should make you eligible for benefits, if you dont put in a full 35 years, you will have a much lower average wage. Thats because a $0-earning year will be included in your calculation for each year you fall short.

Now, you may want to do more than just avoid having zeros included when your benefits are determined. If youre hoping for a big Social Security check you may want to work for more than 35 years.

This makes sense if your current salary is higher than during any of your previous work years. If you work for a 36th or 37th year or even longer, you can push out several of your lower-earning years in your calculation, thus giving your average benefit a boost.

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.

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How Is Social Security Calculated

There is a three-step process used to calculate the amount of Social Security benefits you will receive.

Step 1: Use your earnings history to calculate your Average Indexed Monthly Earnings .Step 2: Use your AIME to calculate your primary insurance amount .Step 3: Use your PIA, and adjust it for the age when you will begin receiving benefits.

You can use a copy of your Social Security statement that provides your earnings history to plug your own numbers into the formulas below.

Working After Full Retirement Age Faq

Should you take your Social Security benefits at age 62?

Retirees may work while collecting Social Security benefits, but those younger than their FRA will be subject to the retirement earnings test .

Under this test, if your earnings exceed a certain limit , you will temporarily forfeit some or all of your benefits. Once you reach full retirement age, your benefit is recalculated and you may receive most of that money back.

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Your Social Security Full Retirement Age Plays A Big Role Know It

First things first:Determine your Social Security full retirement age. For people born between 1943 and 1954, full retirement age is 66. It gradually climbs toward 67 if your birthday falls between 1955 and 1959. For those born in 1960 or later, full retirement age is 67.

You can claim your Social Security benefits a few years before or after your full retirement age, and your monthly benefit amount will vary as a result. More on that in a moment.

If You Are Still Working And Receiving Old Age Security Payments

If you are still working and your income is higher than $79,054 , you will have to repay part of your Old Age Security pension payment. Delaying your first payment can let you keep more of your pension.

If you are planning on receiving the Guaranteed Income Supplement and your income is less than what you reported on your tax form last year, contact us.

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Your Social Security Benefits Will Be Taxed

Most people know that you pay tax into the Social Security Trust Fund throughout your career, but did you know that you may also have to pay tax on your Social Security benefits once you start receiving them? Benefits lost their tax-free status in 1984, and the income thresholds for triggering tax on benefits haven’t been increased since then.

As a result, it doesn’t take a lot of income for your Social Security benefits to be pinched by Uncle Sam. For example, a married couple with a combined income of more than $32,000 may have to pay income tax on up to 50% of their Social Security benefits. Higher earners may have to pay income tax on up to 85% of their benefits.

You may also have to pay state income taxes on your Social Security benefits. See our list of the 13 States That Tax Social Security Benefits.

What If I Continue Working In My 60s

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Many people whose health allows them to continue working in their 60s and beyond find that staying in the workforce keeps them young and gives them a sense of purpose. If this sounds like something youâd like to do, know that working after claiming early benefits may affect the amount you receive from Social Security. Why? Because the Social Security Administration wants to spread out your earnings so you donât outlive them. If you claim Social Security benefits early and then continue working, youâll be subject to whatâs called the Retirement Earnings Test.

If youâre between age 62 and your full retirement age, and youâre claiming benefits, you need to know about the Earnings Test Exempt Amount, a threshold that changes yearly. For 2021, the Retirement Earnings Test Exempt Amount is $18,960/year . If youâre in this age group and claiming benefits, then every $2 you make above the Exempt Amount will reduce by $1 the Social Security benefits youll receive.

Contrary to popular belief, this money doesnât disappear. It gets credited back to you with interest in the form of higher future benefits. You may hear people grumbling about the Social Security âEarnings Taxâ, but itâs not really a tax. Itâs a deferment of your benefits designed to keep you from spending too much too soon. And after you hit your full retirement age, you can work to your heartâs content without any reduction in your benefits.

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