Thursday, September 29, 2022

When Can I Claim Social Security

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Your Social Security retirement age and the amount you receive varies depending on several factors. For example, the earliest age you can collect your Social Security retirement benefits is 62, but there is an exception for widows and widowers, who can begin benefits as early as 60. If you start collecting benefits early and continue to work, your benefits may be reduced.

Here’s how this works with the basics on Social Security claiming ages from 60 to 70.

You Can’t Work Anymore

Even the best retirement financial plans and projections can go awry. For example, you might have planned on working until you’re 70 so you could maximize your retirement benefits. If you get laid off at 62, however, and have difficulty finding another job, you might need to start taking your benefits just to get by.

Additionally, continuing to work in your industry simply might not be possible or healthy for you later in life. If your job requires manual labor, you might decide the risk of injury or other damage to your health isn’t worth continuing to work. In this case, the healthier lifestyle you’ll get by retiring early could outweigh the smaller monthly Social Security benefit.

When To Claim Your Social Security Benefits

The age at which you start collecting your Social Security retirement benefits will affect the amount of benefits that you receive each month. You can start collecting them when you turn 62, which is known as the early retirement option. Or you can start collecting them at your full retirement age, which you will reach at 66 or 67, depending on when you were born. If you start collecting them after your full retirement age, this is known as late retirement.

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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.

Do You Plan To Continue Working In Your 60s

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Working in your 60s will help you maximize your income and savings.

Your benefits are based on your highest 35 years of earnings. Each year of work can add higher earnings to your record by replacing years with low earnings such as those when you were a student, were unemployed, or took time off to care for someone. When you work and wait to claim until age 70, you can increase your monthly benefit by more than 75 percent! Working in your 60s also gives you more time to save on your own for retirement.Review your earnings record on my SocialSecurity.

Working in your 60s will help you maximize your income and savings.

Your benefits are based on your highest 35 years of earnings. Each year of work can add higher earnings to your record by replacing years with low earnings such as those when you were a student, were unemployed, or took time off to care for someone. When you work and wait to claim until age 70, you can increase your monthly benefit by more than 75 percent! Working in your 60s also gives you more time to save on your own for retirement.Review your earnings record on my SocialSecurity.

You can maximize your benefits even if you work fewer hours or stop working.

You can maximize your benefits even if you work fewer hours or stop working.

Consider working in your 60s for an extra boost to your income and savings.

Consider working extra years in your 60s for an extra boost to your income and savings

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You’re 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 you’re working part-time to help make ends meet, taking Social Security at 62 might make sense.

Whatever You Do Dont Blow It Budget It

Just like in pre-retirement life, its easy to view discretionary income as somehow being less valuable than the cash you absolutely must have to cover your necessities. At 25, 75 and every age in between, this is a losing mentality.

Even though it is left over money, you should still create a smart budget for it so that you dont end up blowing through it quickly, said Jake Hill, CEO of DebtHammer. I would recommend simply creating a monthly limit to how much of this money you want to spend, without feeling like you have to spend that much each month. You can also use this money to invest in things like improving your home.

Patel agrees

Create spending categories that are weighted to your liking, he said. If you love to travel, you may want to toss 50% of your extra income into a travel savings account. If you love dining out, you can puff up your dining and entertainment spending category.

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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.

How To Get A Social Security Card

What’s the Best Age to Claim Social Security 62, 66, or 70?
  • Gather your documents. Learn what documents you’ll need to get a card. Select your situation:
  • Adult or child
  • Original, replacement, or corrected card
  • U.S. born citizen, foreign born U.S. citizen, or noncitizen
  • Apply online for a replacement card. Apply online if youre not changing anything on your card and you are eligible. This option is available in most states. You will need to make a my Social Security account first. Or complete an application. If you can not apply online, fill out an application and return it to the SSA. Find out where to take it in person or mail it.
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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.

    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.

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    Do Pensions Count As Income For Social Security

    Only earned income, your wages, or net income from self-employment is covered by Social Security. Pension payments, annuities, and the interest or dividends from your savings and investments are not earnings for Social Security purposes. You may need to pay income tax, but you do not pay Social Security taxes.

    How Much Will You Depend On Social Security

    Don

    Let’s be clear: Social Security isn’t meant to sustain seniors by itself. Right now, those benefits are designed to replace about 40% of the average earner’s preretirement income, while most seniors need roughly double that amount to live comfortably. Furthermore, the latest Social Security Trustees Report stated that once the program’s trust funds run out, which could happen as soon as 2035, recipients could see up to a 20% reduction in scheduled payments. Therefore, depending on Social Security in the absence of independent savings is a very bad idea.

    The fact of the matter, however, is that many seniors do rely on Social Security alone to pay their bills. If you’re behind on savings, and that’s therefore your plan, you probably can’t afford to reduce your benefits in any way. In that case, you should commit your full retirement age to memory, and aim to file for benefits then — not before. If you claim benefits before full retirement age, the lower monthly payment you lock in will remain in effect for the rest of your life unless you manage to undo your benefits application and repay every cent you collected to the Social Security Administration within a year. And chances are that’s not a hit you can afford.

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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 Full Retirement Age

    In addition to how much youve earned over the years, the size of your monthly Social Security benefit depends on when you were born and the age when you start claimingdown to the month.

    Youll receive your full monthly benefit if you start claiming when you reach what Social Security considers your full retirement age , sometimes also referred to as normal retirement age. FRA was 65 when Social Security began, but it has been raised to 67 for anyone born in 1960 or later. To find your FRA, see the chart below.

    Finding Your Full Retirement Age

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    You’re In Poor Health

    Retirement can last 20 or 30 years if you’re a healthy senior, but unfortunately, many people develop illnesses as they age. That’s why planning for healthcare costs in retirement is so important.

    If you’re in poor health, you may need the extra money that Social Security benefits provideand opt to claim benefits early. And, sadly, if you think you may not live to be very old, you could come out ahead on a lifetime basis.

    This strategy could backfire if you have a spouse. If you start collecting early, it will lower your monthly benefit. But it will also lower any survivor benefits your spouse is entitled to after you pass. If your spouse outlives you for many years, this could be a serious financial hit.

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    Claiming Social Security at Age 62

    Dependents of an insured person may be paid a lump sum of 3,400 in the event of a death. The relative must have been employed and making eligible contributions, doing the equivalent of paid work, a disability pensioner or getting industrial injury benefits higher than 66% during the three months prior to the death.

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    What’s The Right Call

    Narrowing down a Social Security filing age is not easy, since there are pros and cons to claiming benefits at different points in time. And in some cases, filing for benefits ahead of FRA does make sense.

    But before you go that route, do consider the drawbacks of claiming Social Security early. And if you’re thinking of filing for benefits at age 62, you may want to land on a compromise that has you claiming them closer to FRA to minimize the hit you’ll take. If your FRA is 67, filing at 64 or 65 could end up being a better choice than signing up for Social Security the moment you’re eligible.

    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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    Financial Benefits Of Working Longer

    Many people want to retire as soon as it is financially feasible to do so, but it’s crucial to consider the earning and investing power you may give up if you stop working full-time and take Social Security at 62. If you leave a job with good pay and benefits, it may be difficult ever to regain that level of compensation if you need or want to return to work later. Of course, not everyone can keep working, but it is something to consider if you are healthy and have the opportunity to stay in the workforce, in either a full-time or part-time capacity.

    The compensation benefits of your job could also affect your Social Security. Some companies allow stock awards to continue to vest after retirement date, and even into years to follow. These payouts are considered income, and could cause your Social Security payment to be taxed, or taxed at a higher level than in years after the awards have fully distributed. Delaying Social Security payments until those other income sources have been reported for tax purposes is worth consideration.

    But there’s even more to the story. As you approach retirement, you’re often at the upper end of your lifetime earnings trajectoryand of your ability to save more for retirement. In addition, if you can keep working, you can make “catch-up” contributions to a tax-deferred workplace savings plan like a 401 or 403 or a traditional or Roth IRA. Catch-up contributions allow you to set aside larger amounts of money for retirement.

    Reasons You Should Claim Social Security Early

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    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.

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    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.

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