Friday, May 20, 2022

When Can I Draw My Social Security

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Can You Work And Collect Social Security Yes With Limits

Can I collect social security and contribute to my 401(k)? Doug Flynn, CFP on the CNN Help Desk

As simple words go, retirement carries a lot of weight and a lot of baggage.

Now that retirement is bouncing around in your mind, and you entertain the thought of giving up your day job, you ask yourself:

  • Is my retirement income and Social Security going to be enough for my preferred lifestyle?

  • What am I going to do with myself every day?

One answer responds to both questions. You can retire, collect Social Security, still work and be productive. The trick is theres a limit to how much you can make depending on your age.

If you are at what Social Security deems full retirement age, you can collect and keep your full Social Security benefits and make as much money as you want.

If you are not yet at full retirement age but are receiving Social Security benefits, you can make up to $18,960 a year without penalty. Thats $1,580 a month, or $364 a week. We get into more details later in this post of what happens when you go over that amount.

No : Work For At Least 35 Years

Many people don’t realize this, but the formula that the SSA uses to compute your benefits is based on your earnings in the 35 years in which you earned the most, adjusted for inflation. If you only earned income in 30 years, the formula will be incorporating five zeros, which will shrink your benefits. Aim to work for at least 35 years, if you can.

Future Of Social Security

Fast Fact

An increase in eligible participants combined with an increase in life expectancy is straining the Social Security program. Because of the financial burden this created, Social Security was amended in 1983, changing the age people can collect full Social Security benefits.

As a result of the 1983 amendments, the retirement age will increase between 2003 and 2026 from age 65 to age 67 with an 11-year gap at which the retirement age will remain at 66, depending on the year of birth.

Economic analysts predict that the Social Security system eventually will pay out more in benefits than it receives in payroll taxes. Analysts have long warned of this shortfall, and they predict the program could be in jeopardy as of 2035.

It is anticipated a reduction in benefits of about 13% or an immediate increase in payroll tax rate from 12.4 to 14.4%, or a little of both, will be needed to allow full payment of scheduled payments for the next 75 years.

As the challenges to meet the needs of millions of retirees continue, policymakers and politicians continue to argue about revamping or privatizing the program. The recent economic downturn has affected jobs and savings programs, further weakening the program. With so many people dependent upon Social Security for retirement benefits, its vital to understand the system and its limitations, as well as to make changes before time runs out.

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What About The Government Pension Offset

The nitty-gritty of the Government Pension Offset is simple. If you meet both of requirements for the GPO you are entitled to a Social Security benefit as a survivor or spouse and have a pension from a government job where you did not pay Social Security tax your Social Security survivor or spousal benefit will be reduced by an amount equal to two-thirds of your pension.

As an example, lets say Michael worked for 30 years as a teacher in California and his wife was an accountant.

Upon retirement, he began receiving his California teachers retirement pension of $3,000 per month. His wife retired at the same time and filed for her Social Security benefits of $2,300 per month. Sadly, she passed away a short three years later.

Upon her death, Michael learned that because of his CalSTRS pension he would not be eligible to receive a normal Social Security survivors benefit. Thanks to the GPO his survivors benefit was reduced to a measly $300 per month. Heres the math:

Some would say thats not fair and I think they have a compelling point. Why? In a case like this the GPO only applies because of Michaels chosen profession. This is effectively a penalty for teaching .

If he had been a pharmacist instead of working in education, he would have been eligible to receive the full $2,200 per month.

If youd like to dig into the Government Pension Offset a little deeper, see my article on What You Should Know About the Government Pension Offset.

If You Were Employed But Werent Covered By Social Security

MYMM 649: Can I Collect My EXs Social Security ...

In the beginning, Social Security didnt cover any public sector employees. But as many states dropped their own pension plans and adopted coverage agreements with the Social Security Administration, things have changed.

Today there are still 15 states that participate solely in their own pension plans instead of Social Security:

Those states are:

  • Rhode Island
  • Texas

If you are a teacher in one of those states, the rules for collecting a Teachers Retirement System pension and Social Security can be confusing and maddening to try and figure out.

Thats especially true if youve paid into the Social Security system for enough quarters to qualify for a benefit, which is fairly common among teachers.

Many teachers find themselves in this situation for a variety of reasons. For some, teaching is a second career, after theyve spent years working in a job or a state where Social Security taxes were withheld.

Others may have taught in a state where teachers do participate in Social Security. For example, teachers in my town, which is divided between the states of Arkansas and Texas, could qualify for both.

If they worked in Arkansas for at least 10 years and then taught in Texas , they would qualify for both Social Security and the Teacher Retirement System of Texas.

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What To Consider Before Filing For Social Security

A larger benefit check sounds great, but there are tradeoffs, and soon-to-retire folks should consider multiple issues before they decide one way or the other on when to file. If you really want to consider all the avenues, then youll have to think about your finances and longevity two issues that people have a hard time grappling with.

But heres the key tradeoff: you can file early and take a reduced benefit, expecting that a shorter lifespan will mean you receive more now, or you could file at full retirement age or later and claim a bigger check, and eventually live long enough to claim more than the first approach.

Social Security is like longevity insurance, says Brent Neiser, a certified financial planner and former chair of the Consumer Advisory Board at the Consumer Financial Protection Bureau. Its a stream of payments that will not stop throughout your life, so delaying your benefits to keep those payments as large as possible forms a helpful base to your retirement plan.

Neiser urges those who have not saved enough for retirement to use whatever means possible to postpone their Social Security benefits until after their full retirement age to help boost their future income.

You can use personal savings to help bridge the gap, but ideally you should plan to work a little longer , Neiser says.

How To Receive Federal Benefits

To begin receiving your federal benefits, like Social Security or veterans benefits, you must sign up for electronic payments with direct deposit.

If You Have a Bank or Credit Union Account:

  • Call the Go Direct Helpline at .

If You Don’t have a Bank or Credit Union Account:

Make Changes to an Existing Direct Deposit Account:

Learn how to make changes to an existing direct deposit account. You also may contact the federal agency that pays your benefit for help with your enrollment.

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Eligibility When Your Ex

If your ex-husband dies, you may receive benefits on his record, as long as your marriage lasted for at least 10 years. If you dont meet the 10-year marriage rule, you can still qualify for benefits if all of the following are true: youre caring for your ex-husbands natural or legally adopted child the child is under age 16, or disabled, and the child is getting benefits on your ex-husbands work record. Your benefits will continue until the child reaches age 16 or the childs disability ceases. The amount of benefits you receive as a divorced spouse will not affect the amount of benefits other survivors receive on your exs record.

Brief History Of Social Security

Social Security Spousal Benefits – MADE EASY to Understand

The Social Security program was created by the Social Security Act that President Franklin D. Roosevelt signed into law in 1935. The first checks went out in 1940. Originally it paid benefits only to workers 65 and older, but in the 1970s the government altered it to allow workers to claim benefits as early as 62. It also instituted annual cost-of-living adjustments to help Social Security keep pace with inflation.

The program has worked fairly well so far, but many people fear for the future, when there will be fewer workers to support a greater number of Social Security recipients. The latest Social Security Trustees’ Report indicates the program’s trust funds would be depleted by 2035, after which it would be able to pay out only about 76% of benefits to retirees and about 92% to disabled workers.

The government has proposed several possible solutions for ensuring the long-term sustainability of the program, but at present no plans have been set. There’s no risk of the program disappearing in the next decade or two, but it’s possible future benefits may not go as far as they do today. That’s why today’s workers need to prioritize their personal retirement savings, so they can cover most of their expenses on their own.

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If You Only Qualify For A Teachers Retirement System Pension

If you have never paid Social Security tax and only qualify for your teachers retirement, its likely youll never receive a Social Security benefit.

Although this makes perfect sense to some, others think its still pretty unfair that this isnt true for everyone. For example, if you had chosen to stay at home as the household manager, you would not have paid into the Social Security system. However, you would be eligible for spousal and survivor benefits.

These intricate Social Security regulations and how differently they may affect a workers retirement income make it critical that you plan ahead and prepare. Before you make your elections on your teachers pension, you must consider how your monthly cash flow would change with a spouses death.

As a teacher, you have plenty to keep up with and these complex rules on Social Security dont make it any easier. Thats why its important to have a quick and easy source of information at your disposal so can make the best decisions for you and your family.

When Can Someone Stop Working And Still Collect Social Security

You can begin collecting Social Security as early as age 62, although you will not receive full benefits. Your benefit amount will be slightly reduced from what it would have been had you waited until full retirement age. The longer you wait to collect your benefits, the higher the amount will be. Upon reaching age 70, your benefit will be the highest amount possible. There is no need to wait past age 70 to begin collecting benefits. Also, at that point, you can earn additional income from another job or investments without any negative effects on your benefits.

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No More File And Suspend

Note that the claiming strategy called file and suspend, which allowed married couples who have reached their FRA to receive spousal benefits and delayed retirement credits at the same time, ended as of May 1, 2016. However, spouses born before Jan. 2, 1954, who have attained their FRA may still be able to file a restricted application. It allows them to claim spousal benefits while delaying their own benefits up to age 70.

Social Security benefits can be taxable if your combined income is high enough.

Get Your Social Security Estimates

Can I collect Social Security from either of my spouses ...

The SSA website provides estimates for how much you’ll collect if you start receiving benefits at age 62, your full retirement age , and age 70. Remember that you don’t have to start taking your benefits at those milestone ages you and your spouse can start collecting anytime between ages 62 and 70.

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Supplemental Security Income Benefits

Supplemental Security Income helps people who are unable to earn sufficient wages on their own. It is available to adults with disabilities, children with disabilities and people 65 or older. Individuals with enough work history may be eligible to receive SSI in addition to disability or retirement benefits. The amount individuals receive varies based on their other sources of income and where they live.

You Can Undo A Social Security Claiming Decision

There aren’t many times in life you can take a mulligan. But Social Security offers you the chance for a do-over. Say you claimed your benefit, but soon thereafter wish you had waited to take it. Within the first 12 months of claiming Social Security benefits, you can withdraw the application. You will need to pay back all the benefits you received, including any spousal benefits based on your record. But you can later restart your Social Security benefits at the higher amount youll earn by waiting.

Early claimers have another opportunity for a do-over: They can choose to suspend their Social Security benefit at full retirement age. Say you took your benefit at age 62. Once you turn full retirement age, you can suspend your benefit. You don’t have to pay back what you have received, and your benefit will earn delayed retirement credits of 8% a year. Wait to restart your benefit at age 70, and your monthly payment will get up to a 32% boost — which could erase much of the reduction from claiming early.

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Your Monthly Social Security Benefits Grow 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 results in a permanent benefits reduction 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. Or you can keep waiting to claim your Social Security benefits all the way to age 70. There’s a big bonus to delaying your claim — your monthly Social Security benefit will grow by 8% a year until age 70. 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 benefit your heirs as well. By waiting to take his benefit, a high-earning husband, for example, can ensure that his low-earning wife will receive a much higher survivor benefit in the event he dies before her. That extra income of up to 32% could make a big difference for a widow whose household is down to one Social Security benefit.

How To Deposit Social Security Benefit Checks

CAN I WORK AND COLLECT SOCIAL SECURITY?

If the SSA is able to send payments to the foreign country where you plan to spend retirement, you have a few options. You can have the checks sent to that country, or you can have them deposited into either a U.S.-based bank account or a foreign account held in a country with an international direct deposit agreement.

Direct deposit is the fastest, most secure way to receive payments. Keep in mind that it will often take longer to receive paper Social Security checks outside the U.S.

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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

Collecting Social Security Benefits As A Spouse

Your spouse is already collecting retirement benefits, the monthly benefit amount will be permanently reduced, his or her surviving spouse is eligible for survivor benefits, you will have this difference as an additional benefit.If your ex-spouse has passed away, If you are entitled to your own Social Security benefit, You are at least 62 , that benefit will be paid first

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Costs Of The Solution

Two issues that are likely to arise in any discussion of fixing this problem are its cost to the Social Security trust fund and its cost to the federal budget. With regard to the cost to the Social Security trust fund, there are three ways to look at the issue.

One way is to view the cost relative to costs in a world in which no pandemic had occurred. For example, the cost could be measured using the economic assumptions in the most recent Social Security trustees report , which were formulated before the pandemic began. From this perspective, the cost would be zero because the legislative change would restore the world of Social Security benefits to what it would have looked like had there been no pandemic.

A second way of looking at the issue is to view the cost of the change relative to costs in a world that reflected economic assumptions indicative of the economic recession caused by the pandemic. From this viewpoint, there would be a cost associated with fixing the problem. For example, the chief actuary of the SSA estimates that if the AWI in 2020 were to fall 5.9 percent below its 2019 level, the AWI adjustments proposed by Chairman Larson would cost $90 billion in present-value dollars for the 75-year period from 2020 through 2094about 0.02 percent of taxable payroll over that period. . The cost over the 10-year period from 2020 to 2029 would be about $21 billion in nominal dollars.

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