Reasons You Should Claim Social Security Early
Your retirement planning likely includes getting income from the Social Security Administration, but when you start collecting Social Security benefits can have a big impact on your planning. The earliest you can collect is age 62, but you’ll get more money if you delay your benefits past your initial Social Security eligibility. If you wait until after your full retirement age to start collecting Social Security you can earn delayed retirement credits, which will increase your benefits even more.
You might think that waiting for bigger benefits is better, but that’s not always the case. There is no definitive answer to when you should collect Social Security benefits, and taking them as soon as you hit the early retirement age of 62 might be the best financial move.
But Wait What Social Security Benefit Can I Claim And When
Smiling retired couple looking at adorable dog while resting in park
A Reference Guide for Social Security Benefits
Many people are not aware of the Social Security benefits they are entitled to. I understand why they dont its very confusing. Heres a straightforward, easy-to-reference guide to the various benefits available to you that will enable you to make an informed and correct claiming strategy.
Lets start with a holistic approach:
Lets talk about your own retirement benefit:
- You are always paid your retirement benefit first if you have one.
- The earliest you can apply for benefits is age 62.
- Its the only benefit that accrues delayed retirement credits.
- The Annual Earnings Limitation applies before full retirement age.
- The Windfall Elimination Provision may apply if you have another government pension.
- You can voluntarily suspend your own retirement benefit at our full retirement age.
- There is no reason to wait past 70 to file for benefits.
Spousal Benefits only apply to your current spouse:
The MAXIMUM spousal benefit at your own full retirement age is equal to 50% of your spouses Primary Insurance Amount if they are collecting their own retirement benefit. If your own retirement benefit is greater than 50% of your spouses Primary Insurance amount, you will not receive a spousal benefit.
Spousal Benefits in cases of divorce:
The MAXIMUM ex-spousal benefit is the same as the current spousal benefit described earlier.
No One Else Is Relying On Your Benefits
In the event of your death, a surviving spouse, minor or disabled child can receive money from the Social Security Administration based on the amount of your benefits. For example, a surviving spouse can receive between 71.5% and 100% of your benefit amount, depending on the surviving spouse’s age. A disabled child can receive 75% of your benefits each month even after you’re gone.
If no one else can qualify for benefits based on your record, you might want to retire early because no one is depending on that money. If everything else falls into place and you meet the minimum Social Security retirement age, consider collecting your benefits early and enjoying life.
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What Is The Social Security Income Limit
The earnings limit is also known as the income limit, or the earnings test. The official term is earnings test, but income limit and earnings limit are the terms that youll hear most often.
For our purposes, know that all these terms mean the same thing and there are four quick facts about the Social Security income limit that you should know before we jump all the way into explaining the test or limit:;
You Already Have Your 35 Highest
Your Social Security benefits are based on your earnings in the 35 years that you had the most compensation. If you’re in your peak earning years, you could boost your benefits if you keep working a few more years and delaying your benefits. However, if you aren’t going to increase your average earnings, such as if you’re only working part-time or you’ve had to retire early, you won’t miss out on the chance to boost your benefits with higher earning years. However, you’ll still receive a smaller benefit for not waiting until full retirement age.
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Youre Covered Under The Civil Service Retirement System
Instead of paying into Social Security, some federal employees hired before 1984 have instead been contributing to the Civil Service Retirement System . The CSRS was formed as part of the 1920 Civil Service Retirement Act and was replaced by the Federal Employees Retirement System in 1987. CSRS recipients do not receive Social Security benefits unless theyre eligible through another job or through a spouse.
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Spouses And Social Security
You can claim Social Security benefits based on your spouse’s work record. If claiming spousal benefits provides more, claiming before your FRA on a spouse’s record means you’ll lose even more than claiming on your own recordthe benefit reduction for a spouse is up to 35% while the reduction for claiming your own benefit is up to 30%. For instance, if you’re the spouse of Colleen in the above example and you are the same age, you’d be eligible for only $650 a month at age 6235% less than the $1000 a month you would get at your FRA of 67.
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Your decision to take benefits early could outlive you. If you were to die before your spouse, they would be eligible to receive your monthly amount as a survivor benefitif it’s higher than their own amount. But if you take your benefits early, say at age 62 versus waiting until age 70, your spouse’s survivor Social Security benefit could be up to 30% less for the remainder of their lifetime.
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What Is My Social Security Retirement Eligibility Age
Your Social Security retirement age and the amount you receive varies depending on several factors, Its also the most popular age to claim benefits , You can claim your benefit at full retirement age (what age depends on when you were born which the Social Security Administration details inMany people decide to claim their Social Security retirement benefits at age 62or when they stop working, who can begin benefits as early as 60, If you delay taking your benefits from your full retirement
When Can I Get Social Security
The earliest you can start receiving Social Security benefits is age 62. But the earlier you elect to receive your benefits, the smaller your monthly checks will be. To receive full benefits, you will have to avoid collecting Social Security until you reach your full retirement age. For people born in 1960 or later, that age is 67.
If you decide to retire early, you have the option of delaying your Social Security benefits. This strategy may work particularly well for married couples.
What Is The Minimum Social Security Benefit At Age 62
The age-based impacts for the minimum Social Security benefit are nearly identical to regular benefits, with one big exception: There are no increases in benefits for delaying filing beyond your full retirement age.;
However, the for filing early still apply. Currently, benefits are reduced as follows if you file for your minimum benefit before reaching your FRA:;
- If you file during the 36 month period prior to reaching your FRA, your minimum Social Security benefit will decrease by .555% per month
- If you file anytime before the 36-month period ahead of reaching your FRA, your benefit decreases by .417% per month.;
Imagine that an individual who attained full retirement age at 67 had enough years of coverage to qualify for the full minimum Social Security benefit of $897. If they filed at 62, there would be a 30% reduction to benefits. This means that for 2020, the minimum Social Security benefit at 62 is $628.;
When Can You File For Social Security
The earliest when you can apply for Social Security benefits is at age 61 and nine months, and you can expect to receive your first payment four months laterthe month after your birthday. Typically, Social Security benefits are paid the month after they are due or must be specified. For example, the Social Security website states that an individual who wants their benefits to start in May will receive their first benefit check in June.
For example, if you turn 62 on Dec. 15, then your first full month of eligibility is January, and your payment for that month will arrive in February. If you have already reached age 62 and met all other eligibility criteria, then you may begin collecting benefits in the same month when you apply if you specify, although your first payment still would not arrive until the following month.
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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.
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Claiming Social Security After Your Full Retirement Age Increases Benefits
You can also wait as late as age 70 to start collecting Social Security benefits. Doing so boosts your retirement benefits. Theres no incentive to wait after age 70 to claim Social Security.;
Heres how your benefit will increase if you wait to claim Social Security:
- If you delay claiming until age 68, your benefit will increase by 8%
- If you delay claiming until age 69, your benefit will increase by 16%
- If you delay claiming Social Security until age 70, your benefit will increase by 24%
Using this example, if you were eligible for a Social Security retirement benefit of $1,000 per month at your full retirement age of 67, the benefit would increase to $1,080 if you delay claiming until age 68; $1,160 if you delay to age 69; and $1,240 if you delay to age 70.;
Once again, the delayed retirement credits accrue monthly, not annually, so every month you wait beyond age 67 will net you a slightly bigger monthly check from Social Security.
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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.
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.
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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.
When Can You Start Collecting Social Security
En español | The earliest you can start collecting retirement benefits is age 62, However, the earliest possible age to collect Social Security is 62, your benefits are reduced a small percent for each month before your full retirement age.
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Claiming Social Security Early Reduces Benefits
You can claim your Social Security retirement benefits as early as 62 but you will receive a smaller amount if you do that. How much your benefits will be reduced depends on your age when you claim Social Security. For example, lets say you are eligible for 100% of your benefits at age 67, which is the full retirement age for anyone born in or after 1960:;
- If you claim Social Security early at age 62, your benefit will be reduced by 30%
- If you claim early at age 63, your benefit will be reduced by 25%
- If you claim early at age 64, your benefit will be reduced by 20%
- If you claim early at age 65, your benefit will be reduced by 13.3%
- If you claim early at age 66, your benefit will be reduced by 6.7%
Under this example, if you were eligible for $1,000 a month at your full retirement age of 67 then the benefit would be reduced to $700 a month if you claimed at 62; $750 if you claimed at 63; and so on, according to the Social Security Administration. The reduction is calculated each month, not on a yearly basis, so every month you wait after age 62 will mean a slightly bigger Social Security check.;
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You Moved Like Far In Retirement
In most cases, you can collect Social Security in another country if you live abroad in retirement, although you have to follow strict and specific rules from both the SSA and your host country. The SSA, however, is generally forbidden from sending payments to a handful of countries, but dont worry. None of them are exactly beacons for U.S. retirees.;
They include Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan and Uzbekistan. Some exceptions can be made for some eligible retirees in those countries, but you can never collect Social Security in Cuba and North Korea.;
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When A Spouse Dies
When one spouse dies, the surviving spouse is entitled to receive the higher of their own benefit or their deceased spouses benefit. Thats why financial planners often advise the higher-earning spouse to delay claiming. If the higher-earning spouse dies first, then the surviving, lower-earning spouse will receive a larger Social Security check for life.
When the surviving spouse hasnt reached their FRA, they will be entitled to prorated amounts starting at age 60. Once at their FRA, the surviving spouse is entitled to 100% of the deceased spouses benefit or their own benefit, whichever is higher.
Watch Out For Hidden Costs
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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