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When Can I Begin Drawing Social Security

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When Do I Start Drawing Social Security?

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Your Earnings Limit Changes At Full Retirement Age

Once you reach your full retirement age, you can receive your Social Security benefit with no limit on the annual amount you can earn at a job. For example, if you turn 62 in 2021, your full retirement age is 66 and 10 months. After the month you reach your full retirement age, you can earn as much as you like annually without having your monthly benefit reduced. To find your full retirement age, visit the SSAs retirement age calculator.

When the SSA determines how much to deduct from your benefit, it counts wages you earn from a job, including bonuses, commissions or vacation pay, or your net earnings if youre self-employed. Pensions, annuities, investment income, interest, veterans or other government or military retirement benefits arent included.

Find out: 6 Crucial Dates for Retirement Planning

Making Sense Of Social Security

Social security is a subject which affects many but is fully understood by few. The most common question that we get asked about social security is when one should begin drawing retirement benefits. The answer is, as in most questions we are asked as CPAs, that it depends.

To answer this question, we will first review who is eligible for social security and what factors determine how much you will receive. Next, we will identify the options you have for drawing benefits. Finally, we will address the advantages and disadvantages of each option.

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When Should I Start Drawing My Social Security Benefits

    Planning for Social Security can be tricky. With so many different caveats and exceptions it can be a daunting task to decide when to start your draw? While Congress took away some of the loophole planning strategies in 2015, there are still many factors to take into consideration.

    Youre eligible to draw Social Security in retirement if youve worked a total of 40 quarters over your lifetime. You can earn up to four quarters a year, as long as you have earned more income than the indexed requirement in a given tax year and pay Social Security tax on that income. Your benefit amount is calculated using the 35 highest years of earnings.

    The Social Security Retirement Age Increases In 2022

    MultiBrief: The real reason to wait to draw your Social Security

    While you can start Social Security payments at age 62, your monthly checks are reduced if you begin collecting benefits at this age. To claim your full benefit, you need to at your full retirement age, which varies by birth year.

    Here’s a look at how the Social Security retirement age is changing, and what this means for your retirement payments:

    — An older Social Security full retirement age.

    — A bigger reduction if you claim Social Security early.

    — Less of a benefit for delaying claiming Social Security.

    — The Medicare eligibility age remains the same.

    — You need to carefully determine the optimal age to start Social Security.

    An Older Social Security Full Retirement Age

    The full retirement age used to be 65 for those born in 1937 or earlier. Those born between 1943 and 1954 have a full retirement age of 66. The full retirement age further increases in two-month increments each year to 66 and 10 months for those born in 1959, up from 66 and eight months for those with a birth year of 1958.

    The full retirement age for those who turn age 62 in 2022, born in 1960, is 67. The full retirement age will remain age 67 for everyone born in 1960 or later.

    A Bigger Reduction If You Claim Social Security Early

    Workers who are eligible for Social Security can start payments at age 62, regardless of their full retirement age. However, the benefit reduction for early claiming is bigger for those who have an older retirement age.

    The Medicare Eligibility Age Remains the Same

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    Apply For Retirement Benefits

    Starting your Social Security retirement benefits is a major step on your retirement journey. This page will guide you through the process of applying for retirement benefits when youre ready to take that step. Our online application is a convenient way to apply on your own schedule, without an appointment. You can also apply by phone or by appointment at a Social Security office.

    How Do Ssdi And Social Security Retirement Work Together

    SSDI pays out your full retirement benefits until you qualify to draw them under the traditional Social Security retirement scheme. Once you reach full retirement age based on the year you were born, the SSA will automatically start your retirement benefits and cease your SSDI payments.

    The SSA allows you to file for retirement benefits as early as age 62. You can also wait and receive your full benefit amount when you reach full retirement age. Depending on what year you were born, this may vary from 65 to 67 years old.

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    What To Consider When Deciding The Best Age For Social Security Benefits

    Youll receive reduced monthly benefits permanently if you start taking them before you reach full retirement age. And the reductions arent small. This breakdown summarizes how much you can lose depending on when you get your retirement benefits:

    • Benefits are reduced by 30% if you opt to start receiving benefits just five years early.
    • If you wait until you full retirement age youll receive 100% of your benefits.
    • You can also elect to postpone benefits beyond full retirement age, up until you are 70.
    • The monthly amount you will receive in the future increases each month you wait to start receiving benefits.
    • If you can wait until the last possible month, your check will be 132% of the full retirement benefit.

    For a fuller comparison, this table from the Social Security Administration shows how much you could get if you retire at age 62 based on your birth year:

    Social Security Administration Early Retirement at Age 62
    Birth Year
    30%$700

    So, its almost always best to delay Social Security benefits for as long as you can. If you plan to work in retirement, youll definitely want to delay. Youll face a penalty if you continue to work after you claim early retirement benefits and earn more than the yearly earnings limit, which for 2020 is $18,960. This means that the Social Security Administration will deduct $1 from benefits for every $2 that you earned over $18,960.

    Tips For Figuring Out Your Full Retirement Age

    When to start drawing Social Security-take it as early as age 62 #socialsecurity #ssdi #62

    Depending on your area of work, its likely that your employers retirement age and the Social Security Administrations full retirement age are different. The universal milestone used to be 65, but the government increased it beginning with people born in 1938 or later. The age gradually increases until it reaches 67 for individuals born after 1959.

    For example, if you were born in 1955, the SSA says your full retirement age is 66 and two months. You would be able to retire from work and claim your benefits now at age 62, but you wont receive full benefits until you reach the SSAs specified retirement age.

    This is important because someone born in 1955 who is eligible to receive $1,000 a month at full retirement age will only get $741 a month if they claim those benefits at age 62. Thats a 26 percent reduction just for collecting early.

    Of course, some people just cant wait. Perhaps theyre in very poor health and unlikely to live long in retirement or they must collect these payments to survive and make ends meet.

    If youre not sure what your full retirement age is, you can use this SSA calculator to help you figure it out.

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    Gaining Back The Reduction In Benefits From Working

    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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    What Other Factors Should I Consider

    • You may want to calculate your breakeven-point to determine at what age total benefits received will be equal at different starting dates. If you wait until FRA to draw benefits, when PIA remains the same, it generally takes around 12 years to receive the same amount of money you would have received had you started collecting at age 62.
    • Receiving benefits may increase your income taxes. Depending on your income level, 50% or 85% of you social security benefits could be subject to taxation. The tax rate on your social security may be higher if you continue working after attaining FRA.
    • Examine the impact of social security retirement benefits on the lifestyle you want during retirement.
    • Consider possible future changes to the social security program including a means test that might cut benefits for high net worth individuals, benefit reductions to preserve the program, or doing away with the program altogether. Some people believe they should get it while they can.
    • Visit www.ssa.gov for additional information and tools, such as a retirement estimator, FAQs, and to view your social security statement.

    There is no one-size-fits-all answer as each individuals circumstances are unique. The decision on when to take your social security retirement benefits should be carefully thought out and planned with your financial and tax advisors.

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    Youre Only Working Part Time

    If you claim Social Security prior to your full retirement age while still holding down a part-time job, you might have your benefits reduced if your work income exceeds the annual limit. For 2021, if you are under full retirement age, your benefits go down by $1 for every $2 your income exceeds $18,960. If you reach full retirement age in 2021, your benefits go down by $1 for every $3 your income exceeds $50,520 prior to reaching full retirement age. If youre working part-time to help make ends meet, taking Social Security at 62 might make sense.

    Whats The Optimal Age To Start Drawing Social Security Benefits

    Get extra income with Social Security

    Social Security benefits can provide a sizeable chunk of income and can possibly be the primary source of income for older Americans. However, many retirees may not fully understand the rules around receiving benefits and the relationship between monthly benefit amounts and associated retirement ages.

    In this article, I will review the basics and factors that go into determining the optimal age to start drawing Social Security benefits. Tax professionals can boost their role as a trusted advisor by sharing this information with their clients.

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    Things To Know About Working While Drawing Social Security

    Thinking about working while receiving Social Security benefits? Heres what to expect.

    Thinking about working while receiving Social Security benefits? Heres what to expect.

    3minute read

    If youre nearing retirement, youve probably got an idea of what your monthly Social Security benefit will be at age 62, the earliest age you can begin drawing Social Security, your full retirement age or at age 70, when you would receive the maximum benefit. Depending on your circumstances, its generally better to wait to draw Social Security until at least your full retirement age, since the benefit will be reduced by about 30 percent if you take Social Security at age 62.

    However, if you plan to continue working even part-time after you begin drawing Social Security, its important to understand how working will affect your monthly benefit, tax liability and future Social Security benefit amount.

    Find out four important facts about drawing Social Security retirement benefits while working below

    When Should You Retire

    To draw full retirement benefits, the following Social Security Administration age rules apply:

    Born in 1937 or earlier – Full retirement can be drawn at age 65Born in 1938 – Full retirement can be drawn at age 65 years and 2 monthsBorn in 1939 — Full retirement can be drawn at age 65 years and 4 monthsBorn in 1940 — Full retirement can be drawn at age 65 years and 6 monthsBorn in 1941 — Full retirement can be drawn at age 65 years and 8 monthsBorn in 1942 — Full retirement can be drawn at age 65 years and 10 monthsBorn in 1943-1954 — Full retirement can be drawn at age 66Born in 1955 – Full retirement can be drawn at age 66 and 2 monthsBorn in 1956 — Full retirement can be drawn at age 66 and 4 monthsBorn in 1957 — Full retirement can be drawn at age 66 and 6 monthsBorn in 1958 — Full retirement can be drawn at age 66 and 8 monthsBorn in 1959 — Full retirement can be drawn at age 66 and 10 monthsBorn in 1960 or later — Full retirement can be drawn at age 67

    Remember that while you can begin drawing Social Security retirement benefits at age 62, your benefits will be 25 percent less than what they will be if you wait until your full retirement age as shown above. Also keep in mind that no matter when you start drawing Social Security benefits, you must be 65 to be eligible for Medicare.

    For example, people who waited until age 70 to retire in 2017 could get a maximum benefit of $3,538.

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    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.

    Can You Get Medicare At 62

    When You Should Start Drawing On Social Security

    You can only enroll in Medicare at age 62 if you meet one of these criteria: You have been on Social Security Disability Insurance for at least two years. You are on SSDI because you suffer from amyotrophic lateral sclerosis, also known as ALS or Lou Gehrig’s disease. … You suffer from end-stage renal disease.

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    What Is The Future Of Social Security

    If you’re 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 it’s better to have something than nothing. The 2021 annual report from the Social Security Trustees, released in August 2021, projects that the Social Security Trust Fund has enough resources to cover all promised benefits until 2034. Then, absent a change from Congress, the trustees project that benefits would need to be cut for all current and future beneficiaries to about 78% of scheduled benefits. The 2021 report includes the trustee’s best estimates of the impact from the pandemic, which were not reported on last year.

    Over the longer term, changes such as later benefit dates or means testing may be considered.

    In any situation, if you’re particularly concerned about the future prospects for Social Security, that’s a good reason to save more, and earlier, for your retirement.

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