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.
Social Security Benefits For Workers Turning 60 In 2020 Will Very Likely Drop Due To The Coronavirus Pandemic
Congress could pass legislation that would prevent this outcome.
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.
How Is Your Retirement Benefits Calculated
The Social Security Administration calculates how much you will receive looking at various factors. But the two main inputs that will determine your future benefits are your average income over your career and your age when you retire.
In order to be eligible to receive retirement benefits you must earn up to 40 credits, the maximum number that you can receive each year is 4, so you will need to work at least 10 years. However, some people take longer to earn those credits and that doesnt take into account the second factor.
The Social Security Administration will also calculate the average of the 35 highest-earning years of your career. If you work for less than 35 years the number put into the equation for years without earnings would be zero, thus bringing down your average. Note that you dont get more than 40 credits even if you earn them in 10 years and keep on working.
Great news for Social Security beneficiaries! Social security benefits will increase 5.9 percent in January due to a cost-of-living adjustment. For more information about the increase, visit .
Rep. Donald Payne Jr
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Receiving Social Security Benefits Early
If you start receiving Social Security at age 62, your monthly benefits will be reduced accordingly by as much as 30%. Benefits increase with each year as you approach full retirement age, at which point you will receive the full amount.
If you start Social Security after age 62 but before you reach your full retirement age, your benefits will still be reduced, but not as much. Social Security reduces your benefit by 5/9 of 1% for each month before your full retirement age for up to 36 months. If you retire more than 36 months before your full retirement age, you lose an additional 5/12 of 1% per month. The formula can be complicated, so the best way to know exactly what you’ll receive based on when you plan to retire is to visit the Social Security website and log into your account or call Social Security at 1-800-772-1213.
What Are The Maximum Amounts That You Can Get
The average Social Security retirement benefit in 2021 is $1,565 a month but will be quite a bit higher in 2022 due to the cost-of-living-adjustment 2022 announced on Wednesday. Beneficiaries will see a 5.9 percent increase in the monthly payments kicking the average up to $1,657, or an increase of $92.
If you turn 62 next year, you can start to claim benefits after you have been 62 for a full month. The maximum you could expect to earn is $2,461 after the increase in 2022. However, starting retirement early may limit the amount that you can get since you will be receiving them for a longer period of time.
If you wait until you reach full retirement age , the maximum that you could receive is $3,334 after the correction for the COLA 2022. Full retirement age for those born in 1955 is 66 years and 2 months. For those born in each subsequent year you need to add two months per year until those born in 1960 and after reach full retirement age when they turn 70.
Currently, those who turn 70 in 2022 could see their maximum potential benefit go up to $4,220. You can check your own estimated monthly benefits using the Social Security Administration online calculator tool. You will need to know your annual income for the past 35 years or use an estimate.
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Check Your Benefit Estimate Too
Checking your estimated Social Security benefit on your statement is another useful exercise, according to Czarnowski.
At one time, Social Security only informed you what your estimated benefit would be at three different ages: 62, your full retirement age and 72. The new statement is much more useful. It provides estimates of your monthly benefit at each age, from 62 to 70, including your full retirement age.
People have a better sense of what they can get from Social Security at different ages, said Czarnowski.
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Why Was The Forecast Off
While the latest numbers represent good news, you have to wonder why so many people had to sweat it out in a panic for the past year or so due to a bad forecast.
Yet economists not involved in the process see how things could go wrong.
“Economic forecasting isnt easy in ‘normal’ times, and 2020 was nowhere close to normal,” said Charles L. Ballard, professor of economics at Michigan State University.
The overall drop in economic activity, he said, could have been expected by many to drive down wages.
But it’s possible, Ballard said, that some forecasts underestimated two things.
“First, the stimulus programs boosted demand very substantially,” he said.
“Second, a very large share of the jobs lost in March and April of last year were low-wage jobs. If we drop out a lot of low-wage jobs from the calculation of average wages, then the average wage will go up, even if nothing else is happening,” Ballard said.
The economic fallout didn’t hit all workers evenly in 2020. Many who held lower paying jobs in restaurants, retail and elsewhere lost work. But at the same time, many others were fortunate enough to hold onto higher paying jobs by working remotely from home.
Richard Johnson, director of the Program on Retirement Policy at the Urban Institute, said total wages went up in 2020, while the total number of people who received a salary or wage went down.
“We had pretty strong wage growth for higher income people,” Johnson said.
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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.
Change In How You Report Earnings
The Social Security Administration bases its benefit calculations on earnings reported on W-2 forms and on self-employment tax payments. Most individuals are not required to send in an estimate of earnings.
However, the Social Security Administration does request earnings estimates from some recipients: those with substantial self-employment income or those whose reported earnings have varied widely from month to month, including people who work on commission. Toward the end of each year, Social Security sends those people a form asking for an earnings estimate for the following year. The agency uses the information to calculate benefits for the first months of the following year. It will then adjust the amounts, if necessary, after it receives actual W-2 or self-employment tax information in the current year.
Once a beneficiary reaches full retirement age, his or her income will no longer be checked. Because there is no Social Security limit on how much a person can earn after reaching full retirement age, there is nothing to report.
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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.
Children Can Collect Social Security Benefits Too
Minor children of Social Security beneficiaries can be eligible for benefits. Children up to age 18 and disabled children older than 18 may be able to receive up to half of a parent’s Social Security benefit. The disability must have occurred before the age of 22. As long as the disability prevents the person from working, the adult child can continue collecting the benefit even after the parent has died.
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You Can Claim Social Security Benefits Earned By Your Ex
Just because you’re divorced doesn’t mean you’ve lost the ability to get a Social Security benefit based on your former spouse’s earnings record. You can receive a benefit based on his or her record instead of a benefit based on your own work record if you were married at least 10 years, you are 62 or older, and single.
Like a regular spousal benefit, you can get up to 50% of an ex-spouse’s benefit — less if you claim before full retirement age. And the beauty of it is that your ex never needs to know because you apply for the benefit directly through the Social Security Administration. Taking a benefit on your ex’s record has no effect on his or her benefit or the benefit of your ex’s new spouse. And unlike a regular spousal benefit, if your ex qualifies for benefits but has yet to apply, you can still take a benefit on the ex’s record if you have been divorced for at least two years.
Note: Ex-spouses can also take a survivor benefit if their ex has died after the divorce, and, like any survivor benefit, it will be worth up to 100% of what the ex-spouse received. If you remarry after age 60, you are still eligible for the survivor benefit.
A claiming strategy if youre divorced: Exes at full retirement age who were born on January 1, 1954, or earlier can apply to restrict their application to a spousal benefit while letting their own benefit grow.
Taking Social Security At 62
Unless you meet a few clear-cut criteria, you’ll want to give the idea of taking Social Security at age 62 quite a bit of thought before you apply for benefits. Unless you have a critical illness, you’ll likely receive more income over your lifetime by starting your benefits later.
If you live to age 84, you can get varying amounts, depending on whether you start Social Security at age 62, 66, or 70. To do the math, multiply your monthly benefit amount times twelve months, then multiply that by the number of years you expect to receive benefits.
- Age 62: $835 × 12 × 22 = $220,440
- Age 66: $1,114 × 12 × 18 = $240,624
- Age 70: $1,470 × 12 × 14 = $246,960
You get more total income by waiting until age 70 to begin benefits. If you live longer, the age 70 plan works even better for you than the examples above.
For instance, if you start your benefits at 70 and live to age 94, you’ll receive over $423,360 from Social Security. If you’d started at 62, you’d only get $320,640.
In general, the longer your life expectancy, the longer you should wait to start drawing Social Security.
Below are a few general guidelines you can use to determine whether it makes sense to take Social Security retirement benefits at age 62.
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Will My Wife Get Half Of My Benefit If She Takes Her Own Benefits At 62 And Later Switches To Spousal Benefits
My wife’s expected social security benefit is less than half of mine. If she claims her benefit at age 62, and then switches to a spousal benefit at age 67 when I claim my social security. will she get half of my benefit or will it be reduced from that level because she started at age 62.?
Hi. No. The reason is that your wife can’t actually switch from drawing her own benefits to drawing just spousal benefits. Once a person files for their own Social Security retirement benefits those benefits continue for the rest of their life. If they later become eligible for a higher spousal or survivor benefit they can apply for an excess spousal or survivor benefit, but they can’t simply switch to the other benefit.
For example, say Amy files for her own benefits at age 62. Amy’s PIA is $500, but she receives a reduced rate of $375 in return for starting her benefits early. Seven years later, Amy’s husband files for his benefits and his PIA is $2500. Amy’s excess spousal rate would be calculated by subtracting her PIA from 50% of her husband’s PIA, which in Amy’s case is $750 . Amy’s excess spousal benefit is not reduced for age because she’s over her full retirement age when she starts drawing that benefit, but her own benefit rate stays at the reduced rate of $375. So, her combined benefit amount would be $1125, which is less than 50% of her husband’s PIA.
What Reduction Am I Looking At
The closer to FRA you are when you file for benefits early, the less of a hit those benefits will take. It’s important to know exactly what sort of reduction you’re looking at for taking benefits before FRA.
Essentially, you’ll lose about 6.67% of your benefits per year for each of the first three years you file early, and then 5% per year after that. This means that if your FRA if 67 but you file at 66, your benefits will be reduced by just 6.67%. But if you file at age 62 with an FRA of 67, you’ll be looking at a monthly benefit that’s 30% lower.
When Can I Start Collecting Social Security
The minimum age to claim benefits is 62. If you are turning 62 and need the income from Social Security to support yourself, then you can start claiming your benefits now. However, if you have enough other income to keep you going until you are older, then you may want to delay to increase the size of your monthly benefit.
Smart Ways To Spend Your Social Security Check
Social Security is the lifeblood of Americas retirement system. More than 49.2 million people age 65 and older 62.2 million in all in the U.S. receive a Social Security check each month, which averages $1,442, according to October 2021 data from the Social Security Administration .
For the typical senior citizen, Social Security represents the majority of their retirement income, according to a 2020 report from the Center on Budget and Policy Priorities.About half of the seniors receiving Social Security depend on it for at least 50% of their income. For about one in four seniors, its more than 90% of their income.
Thats why its important to spend it well. Read on for smart suggestions about how tospend your Social Security benefitsto make sure youre getting the most for your money.
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Whats Your Social Security Break
If youre looking to maximize your total lifetime Social Security payout, youll want to conduct a break-even analysis to determine when you should start drawing your benefits.
Your break-even age occurs when the total value of higher benefits starts to exceed the total value of lower benefits .
For example, if you are eligible to collect a reduced $900 benefit at age 62 plus 1 month, and your benefit would increase to $1,251 at age 65 and 10 months, your estimated break-even age is 75 years and 5 months.
If you expect to live beyond that age, it could make financial sense to delay drawing benefits. The Social Security Administrations life expectancy calculator can help you decide.
When it comes to calculating a start date for Social Security benefits, however, theres not an age thats appropriate for everyone. Consider your own financial needs, health and other retirement plans before making the call. If you cant reasonably afford to live without taking benefits, it may make little sense to delay taking your benefit.