How To Get A Social Security Card
The Problem: The Economic Toll From The Pandemic Will Very Likely Affect Social Security Benefits
The initial retirement benefits that Social Security beneficiaries receive in the first year of retirement are determined by a formula that depends, in part, on the growth of average wages in the economy. Due to the economic fallout from the COVID-19 pandemic, the key measure of average wagesthe average wage index is very likely to decline in 2020. As a result, the initial retirement benefits for those who are first eligible to receive benefits in 2022when they reach the age of 62would be significantly less than what was anticipated only months ago, before the pandemic began to exact its economic toll. The effect is very likely to be so significant that workers turning 62 in 2022 would receive initial retirement benefits that are less than those of workers who were born a year earlier and who had essentially the same earnings history. This incongruity is what Social Security experts call a benefit notch. Such a notch would be unfair to the beneficiaries who turn 60 in 2020 and first become eligible to retire in 2022 because benefits are normally expected to grow for each successive cohort of retirees. Moreover, the benefit reduction and notch would have long-lasting consequences, as they not only would affect benefits in the first year of ones retirement but also lower them for every year going forward, as annual benefits are determined by adjusting the initial level for inflation.
You May Be Getting Social Security Checks For A Long Long Time
Life expectancy is a critical factor in Social Security planning. Of course, no one can predict how long they will live, but according to the CDCs most recent figures, the average American who makes it to age 65 can expect to live another 19 years.
If your Social Security benefit at 70 is more than 75% higher than your benefit at 62, youre going to have a lot more money to take care of your needs as you age.
Dont forget that if youre married, the lower Social Security payment will go away when one of you passes away. If the spouse with the greater Social Security wage history waits as long as possible to file for benefits, he or she will leave behind a bigger benefit for the surviving spouse to live on.
Given that fewer and fewer Baby Boomers will have an employee pension to count on in retirement, it may make sense to maximize Social Securitys reliable income stream.
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What’s Full Retirement Age
Full retirement age is when you’re eligible to receive full Social Security benefits. Your full retirement age depends on your birth year: Under current law, if you were born in 1955 or later, your full retirement age can be anywhere between age 66 and 2 monthsall the way up to age 67 for those born after 1959. If you were born before 1955, you’ve already reached age 66 and full retirement age.
What Happens If You Claim After Your Fra
If you wait until your age 70 to start claiming benefits, then youll get an extra 8% per yearor, in total, 132% of your primary insurance amount for the rest of your life. Claiming after you turn 70 doesnt increase your benefits further, so theres no reason to wait longer than that.
The longer you can afford to wait after age 62 , the larger your monthly benefit will be. Nevertheless, delaying benefits doesnt necessarily mean that youll come out ahead overall. Other factors should be considered, including your expected longevity and whether you plan to file for spousal benefits. You should also consider the tax, investment opportunity, and health coverage implications.
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Can Too Many Early Retirees Affect Social Security
Regardless of when you retire, youll receive around the same amount of Social Security benefits over your lifetime. This is due to cost-of-living adjustments that attempt to protect seniors from inflation.
In other words, Social Security balances itself out. Early retirees receive lower monthly benefits over a long period of time while late retirees receive larger benefit amounts over a short period of time. Retiring early does not affect the Social Security programs finances because the amount of benefits available does not depend on how early or late someone retires.
How Will The Age When You Start Affect Your Monthly Benefit
Workers can claim Social Security as early as age 62. But waiting until full retirement age which is age 65+ for people born in 1942 or earlier, 66 for people born from 1943 to 1954, and over age 66 for people born afterward will generate a baseline amount of monthly payments.1 That amount is based on each individuals prior earnings history. Retiring before full retirement age reduces this baseline by roughly 5-7% for each year you take payments early. Delaying benefits until after full retirement age increases this amount by about 8% per year, up to age 70.2 The longer you wait to claim benefits between the ages of 62 and 70, the more each monthly payment grows.
Of course, there are pros and cons to either approach. If you claim Social Security early, youll receive those benefits for a longer period, but your monthly payment will be smaller. Whereas if you claim benefits later, youll receive payments for fewer years, but each payment will be larger.
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Retirement And Social Security
Factoring in all of these issues can make for a complicated decision as you approach your retirement years. That’s why I say anyone in their 50s or older should learn more about how Social Security works and start thinking about what’s the best way to maximize their retirement income.
In recent years, academic studies have highlighted several ways for eligible recipients to maximize benefits. One strategy involves paying back to the Social Security administration what someone began collecting at age 62 to qualify for a higher monthly benefit based on an older starting age.
A second strategy for married couples suggests maximizing the couple’s joint benefits by claiming a wife’s Social Security benefits at an early age and then delaying the husband’s collection of benefits until beyond his full retirement age.
The Center for Retirement Research at Boston College outlined another strategy in a recently published paper entitled “Strange But True: Claim Social Security Now, Claim More Later.”
It explains how married individuals can benefit from provisions that allow them to collect either a “retired worker benefit” based on their own earnings and/or a “spousal benefit” equal to one half of their spouse full retirement age benefit.
Those likely to benefit most from this approach are husbands in two-earner couples. In most cases, the paper explains, the optimal strategy is for a wife to begin collecting Social Security at age 62 as the first step.
Can A Person Who Is Due A Public Pension Also Collect Social Security Benefits
Two rules could reduce benefits for people who are also entitled to a public pension on earnings not covered by Social Security.
One rule is the windfall elimination provision , which applies to people who worked at jobs covered by Social Security but also worked as noncovered government employees and are due a pension.
When it is time to claim benefits, many people are unprepared for these cuts, Mr. Blair said. Possible W.E.P.-related reductions are not reflected in the workers Social Security statement, which shows the history of annual earnings and estimates of future benefits only for jobs covered by Social Security.
You can have someone who looks at the Social Security statement and it shows a benefit of $1,000 at full retirement age, Mr. Blair said. But the individual a teacher who is due a public pension, for example may be surprised later if the benefit is much lower, he said.
In addition to W.E.P. reductions, a government pensioner who applies for a Social Security spousal or survivor benefit can face reductions. The government pension offset reduces those benefits by two-thirds of the government pension.
Pensioners are exempt from the W.E.P. offset if they paid into Social Security for 30 years or more in jobs with substantial earnings .
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Claim Social Security Before 70 In This Situation
The single best reason to claim Social Security well before age 70 is if your claim for benefits enables a higher earning spouse to delay their claim for benefits.
Say you’re married and you and your spouse want to retire, but you need some money from Social Security to make that happen. If your spouse earned more than you, it would make sense for you to claim your benefits and let them wait to start theirs.
The Right Age To Collect Social Security: 10 Factors You Should Consider
Its one of the most popular questions asked aboutclaiming benefits for your retirement: Whats the right age to collect SocialSecurity? Should you file early or late?
This is not aneasy decision to make, or one to take lightly. No matter what your financial situation, youve likely wondered aboutthe best strategy for you.
So today, take a look at the 10 factors you need toconsider when youre thinking about filing for your benefits.
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Congress Must Act Sooner Rather Than Later
In theory, the AWI problem could be fixed anytime before 2022, when, for example, workers who turn 60 this year are first eligible to retire at the age of 62. But that delay would cause significant anxiety for these workers, whose future benefits would be at risk. Moreover, people decide when to retire based on projections of their incomes in their initial year of retirement and in the remainder of their lives. It would be most unfair to workers decision-making processes to have the expectations of their future incomes be uncertain for some period of time while they are trying to make such an important decision.
Congress needs to act sooner rather than later to ameliorate this problem. One possibility would be to include a fix in the stimulus legislation to cope with the economic effects of the COVID-19 pandemic that Congress is currently considering.
To Wait Or Not To Wait
- Consider taking benefits earlier if
- Consider waiting to take benefits if
- Consider taking benefits earlier if You are no longer working and can’t make ends meet without your benefits.
- Consider waiting to take benefits if You are still working and make enough to impact the taxability of your benefits.
- Consider taking benefits earlier if You are in poor health and don’t expect the surviving member of the household to make it to average life expectancy.
- Consider waiting to take benefits if You are in good health and expect to exceed average life expectancy.
- Consider taking benefits earlier if You are the lower-earning spouse and your higher-earning spouse can wait to file for a higher benefit.
- Consider waiting to take benefits if You are the higher-earning spouse and want to be sure your surviving spouse receives the highest possible benefit.
What If I Delay Taking My Benefits
If you retire sometime between your full retirement age and age 70, you typically earn a “delayed retirement” credit . For example, say you were born in 1955 and your full retirement age is 66 and 2 months. If you started your benefits at age 68, you would receive a credit of 8% per year multiplied by approximately two . This makes your benefit ~15% higher than the amount you would have received at age 66.
That higher baseline lasts for the rest of your retirement and serves as the basis for future increases linked to inflation. While it’s important to consider your personal circumstancesit’s not always possible to wait, particularly if you are in poor health or can’t afford to delaythe benefits of waiting can be significant.
If you decide to wait past age 65, you may still need to sign up for Medicare. In some circumstances your Medicare coverage may be delayed and cost more if you do not sign up at age 65.
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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A Guide On Taking Social Security
The decision of when to take Social Security is highly dependent on your circumstances. You can start taking it as early as age 62 , wait until you’ve reached full retirement age or even until age 70. While there’s no “correct” claiming age for everybody, the rule of thumb is that if you can afford to wait, delaying Social Security can pay off over a long retirement. Here are some of the rules and guidelines.
If You’re Not Sure Why You Received A Payment
If you receive a check or direct deposit payment from the Treasury Department and do not know what its for, contact the regional financial center that issued it.
If you received a check, look for the RFCs city and state at the top center. Then contact that RFC to find out which federal agency authorized the payment. It will be one of these:
If you received payment byelectronic funds transfer , or direct deposit, follow the directions under Find Information About a Payment.
Use the Treasury Check Verification System to verify that the check is legitimate and issued by the government.
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How Should I Decide When To Take Benefits
Consider the following factors as you decide when to take Social Security.
Your cash needs: If you’re contemplating early retirement and you have sufficient resources , you can be flexible about when to take Social Security benefits.
If you’ll need your Social Security benefits to make ends meet, you may have fewer options. If possible, you may want to consider postponing retirement or work part-time until you reach your full retirement ageor even longer so that you can maximize your benefits.
Your life expectancy and break-even age: Taking Social Security early reduces your benefits, but you’ll also receive monthly checks for a longer period of time. On the other hand, taking Social Security later results in fewer checks during your lifetime, but the credit for waiting means each check will be larger.
At what age will you break even and begin to come out ahead if you delay Social Security? The break-even age depends on the amount of your benefits and the assumptions you use to account for taxes and the opportunity cost of waiting . The SSA has several handy calculators you can use to estimate your own benefits.
If you think you’ll beat the average life expectancy, then waiting for a larger monthly check might be a good deal. On the other hand, if you’re in poor health or have reason to believe you won’t beat the average life expectancy, you might decide to take what you can while you can.
When Should You Collect Social Security
Many Americans begin collecting benefits too early, costing them dearly.
May 26, 2009 & #151 — Forget about your investments for a moment. Yes, I know, your portfolio has lost more than 30 percent in a year, but chances are there’s another critical financial issue that you’ve spent a whole lot less time thinking about.
That is when and how you will collect Social Security retirement benefits.
Make the wrong choice, and you could lock yourself into 30 years of reduced income. Make the right choice, and you could more than make up for what you’ve lost in the past year’s market turmoil.
The simple fact is most Americans start collecting Social Security retirement benefits at far too young an age. The typical American begins collecting within one of year of turning 62, the earliest age possible.
Wait until age 70, and the difference is even greater: $19,665 at 62 and $35,672 at age 70.
The cynics rightly point out that recent projections show the Social Security Trust Fund will be exhausted in 2037. But even without any changes in the system before then, current Social Security tax payments will be able to fund benefits at reduced levels.
I happen to believe that by 2037 there will be some type of fix in place even if the political courage to do so now is lacking.
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