Tuesday, August 9, 2022

What Is The Retirement Age To Collect Social Security

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Gaining Back The Reduction In Benefits From Working

What is the Full Retirement Age for Social Security?

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 .

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    How Your Social Security Benefits Are Earned

    To be eligible for Social Security benefits in retirement, you must earn at least 40 “credits” throughout your career. You can earn as many as four credits each year, so it takes 10 years of work to qualify for Social Security.

    In 2021, you must earn $1,470 to get one Social Security work credit and $5,880 to get the maximum four credits for the year.

    Youll Get Less If You Claim Early And Earn Too Much Money

    Once you reach full retirement age, there is no income test for receiving full benefits. But if you claim early and continue to earn income, your Social Security check will shrink if you make too much money. For 2022, you can earn up to $19,560 without seeing your benefits reduced. After that, the SSA will withhold $1 for every $2 you earn above the threshold. If youll reach full retirement age later in the year, you can earn up to $51,960. After that, the SSA withholds $1 for every $3 earned.

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    Should You Take Social Security At Full Retirement Age

    There are tons of factors to consider in deciding when to start your Social Security benefits.

    For people with serious health problems, it might make sense to start benefits early. Someone who was disabled before full retirement age and can no longer work might consider forgoing a higher monthly benefit to start collecting monthly Social Security benefits immediately. Meanwhile, maximizing Social Security benefits is a strategy thats most relevant for people who expect to live longer than average.

    Consider a hypothetical beneficiary who lives to 79, which is the average American life expectancy:

    If they started collecting Social Security at age 62, with a $1,400 monthly payment, they would receive a lifetime total of $285,600 in benefits.

    If they waited until their full retirement age, theyd receive a $2,000 monthly benefit, for a lifetime total of $300,000.

    If they waited as long as possible to claim benefitsto age 70they would get a monthly benefit of $2,600, or a lifetime total of $280,000.

    For this hypothetical American, no matter when they choose to start receiving Social Security benefits, the differences in lifetime total benefits isnt very large. Deciding when to start Social Security isnt always as simple as aiming to maximize your monthly payment.

    How Do Benefits Work And How Can I Qualify

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    While you work, you pay Social Security taxes. This tax money goes into a trust fund that pays benefits to:

    • Those who are currently retired

    • To people with disabilities

    • To the surviving spouses and children of workers who have died

    Each year you work, youll get credits to help you become eligible for benefits when its time for you to retire. Find all the benefits Social Security Administration offers.

    There are four main types of benefits that the SSA offers:

    • Learn about earning limits if you plan to work while receiving Social Security benefits

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    Why It Pays To File For Social Security At Fra

    When you claim Social Security ahead of FRA, your benefits get reduced. And filing at age 62 means slashing your benefits by 25% to 30%, depending on your FRA. That’s a risky thing, because if you end up depleting your nest egg faster than expected, or your retirement living costs end up being higher than expected, you might need more income from Social Security to help compensate.

    Similarly, there’s a risk in delaying your filing beyond FRA — that you won’t end up living a long enough life for that to be your best financial move. See, delaying your claim will result in a higher monthly benefit. It won’t necessarily score you a higher lifetime benefit, though. To get that, you’ll generally need to live a pretty long life, and if you pass away in your 70s, delaying your filing will generally mean ending up with less Social Security income all in.

    That’s why filing for benefits at FRA may be your safest bet. That way, your benefits aren’t reduced, but you also don’t have to wait too long to collect them. If you end up with health issues that shorten your life expectancy, you can at least take comfort in the fact that you didn’t wait too long to first start receiving your benefits.

    How Would This Affect Me

    Most reform proposals are gradual. One proposal would raise the full retirement age by one month every two years to match Americans rising longevity. Another proposes steeper but still gradual increases to further reduce Social Securitys future costs. However its accomplished, raising Social Securitys full retirement age makes sense because it corresponds with Americans lengthening lifespans and reduces the programs costs to lessen the burden on the next generation.

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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.

    Does Working After Full Retirement Age Increase Social Security Benefits

    How much your Social Security benefits will be if you make $30,000, $35,000 or $40,000

    Working after full retirement age could increase your Social Security benefits. Your benefits are based on average wages over your 35 highest-earning years .

    Even after you’ve reached full retirement age, and even if you’ve already claimed benefits, the Social Security Administration continues to recalculate your average annual wage to account for new income. If your earnings after FRA are higher than previous years and raise your average wage for your 35 top-earning years, your benefits could rise accordingly.

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    How To Stop Social Security Check Payments

    The SSA can not pay benefits for the month of a recipients death. That means if the person died in July, the check received in August must be returned. Find out how to return a check to the SSA.

    If the payment is by direct deposit, notify the financial institution as soon as possible so it can return any payments received after death. For more about the requirement to return benefits for the month of a beneficiarys death, see the top of page 11 of this SSA publication.

    Family members may be eligible for Social Security survivors benefits when a person getting benefits dies. Visit the SSA’s Survivors Benefits page to learn more.

    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.

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    What A Social Security Break

    In a nutshell, a Social Security break-even calculator can tell you when the best age is to start taking Social security benefits, in terms of how much money you could expect to receive over time. Going back to the previous example, lets assume that you track your benefit amounts over a 10-year, 20-year and 30-year period. Heres how your total benefits received would look over each of those periods, for all three starting points.

    Your cumulative benefits after 10 years:

    • $144,000, starting at age 62
    • $122,400, starting at age 66
    • $52,800, starting at age 70

    Your cumulative benefits after 20 years:

    • $288,000, starting at age 62
    • $326,400, starting at age 66
    • $316,800, starting at age 70

    Your cumulative benefits after 30 years:

    • $432,000, starting at age 62
    • $530,400, starting at age 66
    • $580,800, starting at age 70

    You can see that youd draw the most Social Security benefits in total if you wait until age 70 to start taking them, assuming you live to age 100. But that could be a big if when youre not in the best health.

    What you have to keep in mind when using a Social Security break-even calculator is that the numbers are hypothetical. They dont take into things that could affect your ability to draw benefits or how far those benefits might go, such as:

    How Does Working After Full Retirement Age Affect My Benefits

    Social Security Guide

    Continuing to work past your full retirement age, whether or not you take benefits, can potentially increase your future benefits. Thats because the Social Security administration calculates your primary insurance amount based upon your 35 highest-earning years and uses zeros for the calculation if you have worked fewer than 35 years.

    Working longer replaces each of those zeroes, or even lower earning years if you have no zeros, which boosts your PIA. Its also important to note that lower-earning years after retirement will not affect your benefits since Social Security uses whichever 35 years are your highest earning.

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    How To Plan For Future Benefits

    In 2000, the average age at which people retired was roughly 61 or 62. Two decades later, it’s around 66, according to government data, Warshawsky said.

    “Just in 20 years, we’ve seen a substantial increase in the retirement age,” Warshawsky said. “People really, really are working longer.”

    Anecdotally, Elsasser said he sees more people retiring earlier than they had anticipated as their work prospects change.

    That highlights the importance of planning ahead, so you anticipate whatever your retirement years bring. Admittedly, that can be tricky, given that Social Security could be susceptible to change.

    If you’re 60 and up, there is less reason to worry any prospective changes would affect your benefits, Elsasser said.

    But if you’re 45 to 60 years old, it’s reasonable to plan for benefit reductions of about 5%, he said. For those who are even younger, a 10% to 15% cut is possible.

    Moreover, people of all ages should also plan for worst-case scenarios in which the program does reach a point where it can only pay a portion of benefits, which may prompt as much as a 24% benefit cut for retirees.

    “The real importance of planning is just making sure you have all your bases covered,” Elsasser said.

    Factors That Affect Social Security Benefits

    The math seems to say that everyone should wait until age 70 to reap the best benefits, but this isnt always the case. There are times when it might make sense to start collecting earlier. If, for example, you are in poor health or if the family breadwinner is ill and can no longer work, collecting before your full retirement age could help prevent debt from mounting up.

    Your marital status also plays a factor. If youre single and in poor health, you could end up using your savings to pay for medical bills between the ages of 66 and 70. In this case, you might be better off collecting Social Security benefits at a lower rate than holding out for the higher payments youd receive at age 70.

    If, however, youre single, in good health and either still working or have plenty of savings, consider waiting until age 70 in order to benefit from the higher payments.

    With married couples, it could be best for the spouse who earns the most money to hold off until 70, while the spouse who makes less starts collecting at 62. This approach will ensure that when one of you passes away, the surviving spouse will receive the higher benefitsgenerally the amount their spouse would have received at age 70, even if the spouse died before that age.

    For more help with retirement planning, consider contacting a Certified Financial Planner. They can help you ensure youre maximizing your Social Security benefits and answer any questions you have about your other assets.

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    Getting A Social Security Number For A New Baby

    The easiest way to get a Social Security number for your child is at the hospital after they are born when you apply for your childs birth certificate. If you wait to apply for a number at a Social Security office, there may be delays while SSA verifies your childs birth certificate.

    Your child will need their own Social Security number so you can:

    • Claim your child as a dependent on your income tax return
    • Open a bank account in their name
    • Get medical coverage for them
    • Apply for government services for them

    Keep your Social Security card in a safe place to protect yourself from identity theft.

    What Is The Maximum Amount You Can Earn While Collecting Social Security In 2021

    When Can I Retire and Collect Social Security? What’s The Best Age?

    $18,960 if youre under the age of full retirement. Benefits are withdrawn for every $2 beyond the limit. $19,560 Benefits are withdrawn for every $2 beyond the limit. $50,520 in the year you reach full retirement age Benefits are withheld for every $3 above the limit until the month you reach full retirement age.

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    Who Should Delay Benefits

    If you are married and the higher wage earner, it generally makes sense for you to wait as long as possible to claim.

    One reason for that is Social Security payments are based on mortality tables that have not been updated since 1983. And life expectancies have increased since that time.

    People are living longer than they would have been expected to back in 1983, and therefore the credits that you get for delaying Social Security are worth more to you than they would be if they were actuarially fair, Jones said.

    Holding off until age 70 makes sense particularly for the higher earner of a married couple because their benefits will in turn determine spousal and survivor benefits for their significant other.

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    Your Monthly Social Security Benefits Increase The Longer You Wait To Claim

    You can collect Social Security benefits as soon as you turn 62, but taking benefits before your full retirement age means a permanent reduction in your payments of as much as 25% to 30%, depending on your full retirement age.

    If you wait until you hit full retirement age to claim Social Security benefits, youll receive 100% of your earned benefits. But you can also get a big bonus by waiting to claim your Social Security benefits at age 70 your monthly Social Security benefit will grow by 8% a year until then. Any cost-of-living adjustments will be included, too, so you don’t forgo those by waiting.

    Waiting to claim your Social Security benefits can help your heirs as well. By waiting to take her benefit, a high-earning wife, for example, can ensure that her low-earning husband will receive a much higher survivor benefit in the event she dies before him. That extra income of up to 32% could make a big difference.

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    The 10 Factorsto Consider To Determine When You Should File For Social Security Benefits

    When youre making the decisionabout when to file , there are atleast 10 factors that you need to consider to get to the right answer. All ofthese factors are very important to account for but there can be disastrousconsequences for ignoring the last two in particular.

    Factor1: Whats Your Gender?

    Your decision about when to collect SocialSecurity begins with your gender. The decision to delay or not is moreimportant for women than it is for men. There are two reasons for this:

  • Women live longer than men.
  • On average, Social Security makes up a greater percentage of a womans retirement income .
  • The decision to file later and get ahigher benefit is possibly more important for a woman to consider. According todata from the Social Security Administration, men usually have a higher benefitamount than the women theyre married to.

    If thats your case, you need to exercisecaution filing based on the impact your benefit will have to your wife .

    Factor 2: What Does Your Marital History Look Like?

    Next, consider your marital history. If you had prior marriages, figure out if you areeligible for benefits from any of those past marriages that could boost yourown benefit.

    For example, if you have aneligible deceased spouse or ex-spouse, it could make sense to file for asurvivors benefit as early as age 60 and switch to your own benefit later.

    If you have an ex-spousewho is still living you need to figure out if you are entitled to a higherbenefit from the spousal provisions

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