How The Retirement Age Could Change
Retirement ages were last altered in 1983 under then-President Ronald Reagan.
Those changes, which raised the full retirement age to 67 from 65, are still being phased in today.
Even just the bump up to age 66 from 65 represented a 5% benefit cut, Elsasser noted.
Many experts expect that any future changes could push up the Social Security retirement age. Notably, the Social Security 2100 Act: A Sacred Trust, introduced by Rep. John Larson, D-Conn., last year, would leave those thresholds unchanged and, in some respects, make benefits more generous. But the legislation has a five-year timeframe.
Separately, the Social Security Administration has scored the financial effects other proposals to change the age thresholds could have on the program.
Just in 20 years, we’ve seen a substantial increase in the retirement age.Mark J. Warshawskysenior fellow at the American Enterprise Institute
“I expect that at some point in the not too distant future, Congress will agree on a Social Security package that includes some type of adjustment to the retirement age,” Akabas said. “Whether that’s in two years or 10 years, it’s very difficult to predict.”
Experts say it’s possible the full retirement age could get pushed up by a year or two, which could be gradually phased in.
Additionally, lawmakers could also raise the initial age for eligibility for retirement benefits from 62, as well as the highest age for delaying benefits and earning benefit increases from 70.
What To Consider Before Filing For Social Security
A larger benefit check sounds great, but there are tradeoffs, and soon-to-retire folks should consider multiple issues before they decide one way or the other on when to file. If you really want to consider all the avenues, then youll have to think about your finances and longevity two issues that people have a hard time grappling with.
But heres the key trade-off: you can file early and take a reduced benefit, expecting that a shorter life span will mean you receive more now, or you could file at full retirement age or later and claim a bigger check, and eventually live long enough to claim more than the first approach.
Social Security is like longevity insurance, says Brent Neiser, a Certified Financial Planner and former chair of the Consumer Advisory Board at the Consumer Financial Protection Bureau. Its a stream of payments that will not stop throughout your life, so delaying your benefits to keep those payments as large as possible forms a helpful base to your retirement plan.
Neiser urges those who have not saved enough for retirement to use whatever means possible to postpone their Social Security benefits until after their full retirement age to help boost their future income.
You can use personal savings to help bridge the gap, but ideally you should plan to work a little longer , Neiser says.
Working After Full Retirement Age Faq
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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The Second Best Choice
Single Social Security claimants who want to hold off until age 70, but find they cant quite wait any longer should select age 69 for the best trade off, according to Christopher Jones, chief investment officer at Edelman Financial Engines.
That sacrifice may be as little as a few thousand extra dollars in additional lifetime benefits in exchange for starting a year earlier, according to Jones.
If youre single, well tell you you should wait until 70, Jones said. It is generally preferable to do so.
“But its not quite as critical as it is going from 66 to 67, or 67 to 68.
In a low interest rate environment, it’s hard to beat the potential increases for every year you delay claiming your benefits, Jones said.
Thats a guaranteed real rate of return backed by the federal government, Jones said. You cant get real rates of return at 6% to 8% right now not even close in the marketplace.
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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.
When To Stop Working
While its often the case, the age you start collecting benefits might not necessarily be the same age that you actually stop working. How you choose to approach this situation will also affect the amount of money you receive.
Your Social Security payments are ultimately determined by the top 35 years of earnings during your professional life. If you stop working before the age that benefits kick in, those years are marked as zero income, which could lower the benefits you receive. Conversely, the longer you work high-income jobs, those lucrative years can replace earlier, lower-income years, which will raise your benefits.
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How A Social Security Break
Figuring out the right time to start taking Social Security benefits isnt always a straightforward process. A Social Security break-even calculator can help you get some perspective on the numbers so you know what you stand to gain or lose by taking benefits earlier versus later.
Social Security break-even calculators help you find the best age to start taking retirement benefits. They do this by comparing your cumulative Social Security retirement benefits paid at age 62, your full retirement age and at age 70 and estimating how long it would take the benefits paid at age 70 to break even with benefits paid starting at age 62.
Heres a simple calculation to give you an idea of how a Social Security break-even calculator works. Say that you have the option to begin receiving $1,200 a month in benefits at age 62. Youd receive $1,700 in benefits if you wait until full retirement age at 66. Or you could receive $2,200 a month in benefits by delaying them until age 70.
The break-even point represents when the cumulative benefits even out. So if you wait until age 70 to start taking benefits, it would take you until age 79 to break even with the benefit amount youd receive if you started taking them at age 62. If you were to start receiving benefits at age 66, it would take you until age 75 to break even with the benefits youd receive if you started them at 62.
What Is The Average Social Security Benefit Per Month
Social Security offers a monthly check to many types of beneficiaries. As of August 2021, the average allowance is $ 1,437.55, according to the Social Security Administration, but that amount can vary dramatically depending on the type of recipient. In fact, retirees typically earn more than the overall average.
What is the minimum monthly Social Security benefit? This means that for 2020, the minimum social security benefit at 62 is $ 628.
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Social Security Disability Programs
In addition to retirement benefits, the Social Security Administration manages two programs that provide benefits to people who are disabled or blind.
- Social Security Disability Insurance Program
- SSDI supports disabled or blind individuals by providing benefits based on their workers contributions to the Social Security trust fund. Your contributions are based on your earnings or your spouses or parents earnings while in the workforce. Your dependents may also be eligible for SSDI benefits based on your earnings.
- Supplemental Security Income Program
- SSI benefits are paid out as cash assistance to people with limited incomes and resources who are elderly, blind or disabled. These benefits may also include blind or disabled children. SSI payments are a federal benefit funded by the general fund of the United States not the Social Security trust fund. Some states provide additional state supplemental benefits in addition to the federal SSI payments.
In some cases, people may be eligible for both SSI and SSDI at the same time. The Social Security Administration calls these concurrent benefits. This can happen when a disability qualifies you for Social Security Disability Benefits, but you only get a small amount of monthly SSDI benefits. This may qualify you to receive SSI benefits as well.
Comparing SSDI and SSI Programs
|Up to 85%|
Income Taxes for Other Benefit Programs
The Bottom Line On When To Claim Your Social Security
Every individuals and couples needs are different when it comes to claiming Social Security. But maybe waiting until age 70 is something we should seriously consider.
Even if youve already filed, you may find that youre eligible for a do-over. You can withdraw your application for up to 12 months after you file, and reapply later. But you only get one do-over. If it makes sense for you to do this, youll have to pay back the Social Security benefits that you received, and in many cases your IRA or 401 may be where you have to get that money.
If you arent sure which Social Security claiming strategy is the best fit for your needs and goals, talk to a financial adviser who is knowledgeable about retirement income planning and, specifically, Social Security benefits. An experienced professional can lay out all your options and help you work out a timeline.
Kim Franke-Folstad contributed to this article.
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How Do You Apply For Social Security Benefits
If you are eligible for Social Security benefits, you can apply online, by phone or by appointment at a local Social Security office.
How to Apply for Social Security Benefits
- Applying online is the easiest way to apply for Social Security benefits. The Social Security website allows you to apply for retirement, spouses, Medicare and disability benefits at the same site. You can also apply for Supplemental Security Income benefits.
- If you dont have Internet access, you can sign up by phone. You can call the Social Security Administration at 1-800-772-1213 .
- The Social Security Administration has restrictions on office visits during the COVID-19 pandemic. It does allow in-person visits for certain services. You should check with the SSAs Coronavirus page to see if you can make an in-person appointment at your local office.
What Is The Average Social Security Benefit At Age 62
According to the Social Security Administrations payment statistics as of June 2020, the average Social Security benefit at age 62 is $ 1,130.16 per month or $ 13,561.92 per year.
How much will I get a month if I retire at 62?
If a person of full retirement age received $ 1,000 in benefits per month, a person who retired at age 62 will only receive $ 708 per month in comparison. While those who wait until turn 70 would get $ 1,253 per month.
What is the most you can collect from Social Security at age 62?
In 2021, the maximum amount you can get in benefits if you apply for at the age of 62 is $ 2,324, but if you qualify for the maximum and your full retirement age is 66, then wait until then to start the your benefits entitles you to $ 3,113 per month. Thats a big increase for waiting five years or less to apply for social security.
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Supplemental Security Income For Those Aged 65 & Older
Theres another benefit called Supplemental Security Income that people can qualify for once theyre at least 65 years old. People traditionally refer to SSI as welfare, and it pays no more than $794/month. Once you hit the magic age of 65, you can apply for SSI payments if:
- Your current income is less than $1,310
- You have less than $2,000 in countable assets
To apply for SSI, youll need to call your local Social Security office and speak to an agent on the phone. You can find the right number to call by visiting the SSAs office locator page and entering your current ZIP code.
What About Taxes On Social Security
Keep in mind that Social Security benefits may be taxable, depending on your combined income. Your combined income is equal to your adjusted gross income , plus non-taxable interest payments , plus half of your Social Security benefit.
As your combined income increases above a certain threshold , more of your benefit is subject to income tax, up to a maximum of 85%. For help, talk with a CPA or tax professional.
In any case, if you’re still working, you may want to postpone Social Security either until you reach your full retirement age or until your earned income is less than the annual limit. In no situation should you postpone benefits past age 70.
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How Youll Be Taxed
While all sorts of factors will go into determining the actual amount you start receiving, you may end up owing taxes on it come April. While the first 15 percent of your benefits wont be taxed regardless, there is a formula to keep in mind that can help you get a better grasp of whats to come. Take your adjusted gross income, add any non-taxable income like municipal bond interest, and add that to half of your total Social Security benefits. The total will determine the taxes you pay.
While taxes on benefits are normally reserved for higher-income recipients, tax rates do change, so remember that the lower your overall income evaluation is, the less likely youll take a hit on them in the future.
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Contact Farmer & Morris Law Pllc For Further Assistance
Farmer & Morris Law, PLLC, can be reached at . Please give us a call to discuss your case and learn more about the various benefits you may be entitled to receive. If you need help applying for benefits or appealing a denial notice, we may be able to help you.
A team member can also explain to you how to file for benefits, what kinds of proof you need to substantiate a claim, and how to plan your benefits leading up to and beyond your retirement age. Many factors come into play in determining your benefits, and we can help you make informed decisions regarding them.
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You Need To Pay Down Debt
There are some debts you need to tackle before you retire. If you have high-interest debt, claiming Social Security early can help you pay the debt down. Depending on the interest rate youre paying, the 8% yearly boost to your benefits that you receive for each year you wait past full retirement age might not be worth the increased monthly benefit. Using the early benefits to reduce or eliminate your debt earlier could mean youll be able to keep more of your benefits in the future.
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Financially Qualifying For Ssi
Because minors often have minimal or no income or assets of their own, the SSA must consider the financial circumstances of the child as well as the parents, guardians, foster parents or other caregiver. Children are also unable to apply for benefits for themselves, which means the SSA has standard processes in place to allow any adult who cares for a child with a disability to apply for SSI on his or her behalf.
Before applying, you may wish to review the SSAs Child Disability Starter Kit. This kit explains the SSI program and the information and documentation that will be necessary for filing a claim on behalf of a child. The SSA must review the financial details of the household in which the child lives. This includes the income, assets and other financial resources of the entire family.
Although the SSI qualification rules are strict, many children are able to receive support, even when they have two parents who work and earn a decent living. This is because the SSA excludes some income and other financial resources from consideration. They additionally only assign or deem a portion of available income and assets to the child, which makes it more likely a child will be approved. Also considered is family size and whether income is earned or unearned, among other factors.
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