Thursday, June 16, 2022

When Can You Start Applying For Social Security

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What Is The Break Even Point And Why Is It Important

How to Apply for Social Security Benefits

Whenever you wait until age 70 to collect benefits, you’ll be missing out on the years you weren’t receiving payments. If you’re deciding when to collect, you might consider calculating your break even point.

Your break even point tells you at what age you’ll receive more in total Social Security earnings, by collecting at full retirement age or at age 70, than you would have had you collected benefits early.

For many people, the breakeven point is around 12 and ½ years after age 70 or full retirement age, says Blair.

For example, if you collected early at age 62 rather than delay until your full retirement age of 67, you would be earning an additional five years worth of benefits. However, if you collected at 62, your benefit would be reduced by 30%. An individual collecting at age 67 would need to survive around another 12 years after collecting benefits to ‘break even’ compared to getting payouts starting at age 62.

You can calculate your own break even number, but note that the number might not be accurate if you don’t consider factors like the cost of living adjustment or having a spouse, divorced spouse or survivor’s benefit.

Limits On Earned Income If Claiming Early Benefits

Until you reach full retirement age, Social Security will subtract money from your retirement check if you exceed a certain amount of earned income for the year. For the year 2021, this limit on earned income is $18,960 . The amount goes up each year. If you are collecting Social Security retirement benefits before full retirement age, your benefits are reduced by $1 for every $2 you earn over the limit. Once you reach full retirement age, there is no limit on the amount of money you may earn and still receive your full Social Security retirement benefit.

Example

Henry is considering claiming early retirement benefits this year, at age 64. Social Security calculates that if he does so, he’ll receive $866 a month . But Henry also intends to continue working part-time, with an income that will be about $5,000 over the yearly limit on earned income. If he does claim the early benefits and makes that part-time income each month, Henry would lose one dollar out of two from the $5,000 he earns over the limit, which means $2,500 for the year. So, by claiming early retirement and continuing to earn over the limit, Henry incurs a double penalty: His retirement benefits are permanently reduced by 13%, and he loses an additional amount every month to the extent he earns over the income limit.

Social Security does not reduce each monthly check by a small amount, unfortunately. Instead, the agency may withhold several months’ entire checks until the reduction is paid off.

What Is The Best Social Security Claiming Strategy

To review, you can start taking your Social Security retirement benefits: as early as age 62, when you reach full retirement age, or after full retirement age .

Which is right for you?

Lets revisit our earlier theme: Remember, your eulogy will say nothing about how amazingly strategic you were with your Social Security benefits!

So, beyond crunching the numbers, be sure to ground your decisions in this greater question:

How can I create my best possible retirement?

Then assess your most promising claiming strategy.

For example, in raw dollars, most people will receive the most money by waiting until age 70 to start taking Social Security. But this may also mean living on a tighter budget than necessary in early retirement, when you are probably at your most healthy and mobile stage.

So, does it still make the most sense for you to postpone the payments? Lets dig in further by answering our next top Social Security question.

Also Check: At What Age Can I Claim Social Security

Special Rule As You Approach Full Retirement Age

If you are already receiving your retirement benefits, a special higher earnings limit applies in the calendar year you turn your full retirement age . If you will reach full retirement age in 2021, you can earn up to $4,210 per month without losing any of your benefits, up until the month you turn 66. But for every $3 you earn over that amount in any month, you will lose $1 in Social Security benefits. Beginning in the month you reach full retirement age, you become eligible to earn any amount without penalty.

If you are self-employed, you may receive full benefits for any month during this first year in which you did not perform what Social Security considers “substantial services.” The usual test for whether you worked substantial services is whether you worked in your business more than 45 hours during the month . In other words, if you work in your business more than 45 hours in a month, Social Security may reduce your benefit.

A Guide On Taking Social Security

When should you take Social Security?  Wiser Wealth Management

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.

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Is Social Security Taxed

As touched on above, up to 85% of your Social Security benefits may be taxable. As with any taxable income, you could incur a big bill due in April, potentially with penalties if youve underpaid your taxes.

Depending on your other income, you may want or need to make quarterly estimated payments, or have a portion withheld upfront. There are a number of nuances to this conversation, so consulting with a tax professional is warranted.

Waiting For Approval And Monitoring Your Status

The final step is waiting for approval. Once your application is submitted, the Social Security Administration will review your information to make a determination. If anything is missing that is needed to help decide, they will reach out to you for more information. Depending on your case and the influx of other applications, the waiting process can be anywhere from a few weeks to a few months. This is why its best not to wait until the last minute to apply for Social Security.

Once your application is approved, you will begin receiving Social Security payments. Its essential to monitor your status and make sure any changes, such as a job change or address change, are reported to Social Security. This will help ensure your payments are processed correctly, you are receiving all the benefits you are entitled to, and no violations are taking place on either partys part.

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You Have A Shorter Life Expectancy

The government incentivizes waiting to collect your Social Security benefits by giving you a larger monthly amount the longer you delay. For example, if you start collecting benefits at age 62 when your full retirement age is 66, your monthly benefit will be about 75% of your full-age benefit. So if you expected your monthly benefit to be $1,000 per month at 66, you would only receive around $750 at 62.

Although a larger monthly benefit might sound great, keep in mind that you’d have to wait four years to get that extra $250 per month. You would receive $36,000 during those four years at the reduced amount of $750 per month.

When you start collecting $1,000 at age 66, that extra $250 per month won’t let you break even for 12 years compared to collecting early. If your health is declining and you don’t expect to live until you’re 78, you’ll receive more in benefits during your lifetime if you start claiming as soon as possible.

Receiving Social Security Benefits Early

How To Apply For Social Security Benefits: What You Need To Know

If you start receiving Social Security at age 62, your monthly benefits can be reduced by as much as 30%. Benefits increase each year as you approach full retirement age, at which point you will receive the full amount.

If you start Social Security after age 62 but before you reach your full retirement age, your benefits will still be reduced, but not as much. Social Security reduces your benefit by .56% for each month before your full retirement age for up to 36 months. If you retire more than 36 months before your full retirement age, you lose an additional .42% per month. The formula can be complicated, so the best way to know exactly what you’ll receive based on when you plan to retire is to visit the Social Security website and log into your account or call Social Security at 1-800-772-1213.

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When To Apply For Social Security Retirement Benefits

The Social Security Administration suggests that you apply three months before you want to start receiving benefits. But how do you know its time to receive retirement benefits?

You can start receiving your Social Security retirement benefits anywhere between age 62 and 70. However, if you start taking Social Security before your full retirement age between the ages of 66 and 67, depending on when you were born your benefits will be permanently reduced. The earlier you take your benefits, the larger the reduction.

But if you wait until after your full retirement age, youll earn delayed retirement credits, which increase your benefits 8% per year. You stop getting these credits when you turn 70, so theres no point in waiting after that to retire.

We suggest waiting as long as possible to retire in order to get the largest monthly benefit possible. Social Security is a guaranteed, inflation-proof source of income that will last for your entire life, and is the bedrock of your retirement income. Continuing to work also allows you to build a larger nest egg to fund your retirement, and will also decrease the number of years youll need to fund.

Change In How You Report Earnings

The Social Security Administration bases its benefit calculations on earnings reported on W-2 forms and on self-employment tax payments. Most individuals are not required to send in an estimate of earnings.

However, the Social Security Administration does request earnings estimates from some recipients: those with substantial self-employment income or those whose reported earnings have varied widely from month to month, including people who work on commission. Toward the end of each year, Social Security sends those people a form asking for an earnings estimate for the following year. The agency uses the information to calculate benefits for the first months of the following year. It will then adjust the amounts, if necessary, after it receives actual W-2 or self-employment tax information in the current year.

Once a beneficiary reaches full retirement age, his or her income will no longer be checked. Because there is no Social Security limit on how much a person can earn after reaching full retirement age, there is nothing to report.

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How To Get A Social Security Card

  • 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.
  • Reasons You Should Claim Social Security Early

    The ins and outs of applying for Social Security benefits

    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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    What Other Factors Should You Consider When Deciding To Collect Social Security

    Before you decide to collect Social Security based on your break even point, you should also consider how collecting early or delaying could impact the benefit your spouse receives.

    Since the Social Security formula benefit is based on an individual’s 35 highest earning years, women often collect less in benefits than men because of career breaks during motherhood and overall lower lifetime earnings. However, the Social Security spousal benefit erases some of the disparity in Social Security earnings between men and women.

    The spousal benefit is available to all spouses, regardless of whether the spouse has a work history or not . The spousal benefit is 50% of the higher earner’s benefit and in order for a spouse to receive the benefit, the higher-earner must be collecting their own benefit.

    The Social Security administration automatically determines whether an individual would earn more in Social Security benefits if they collected on their own work record versus their partner’s work record.

    For example, if the higher earner receives a $2,000 monthly benefit, the spouse is eligible to receive up to $1,000, depending on whether they choose to wait until full retirement age, says Kiner. For example, if someone collects the spousal benefit four years before full retirement age, their benefit will be 35% of the higher-earner’s benefits.

    Timing And Your Health Coverage

    Your health insurance coverage can also play a role in deciding when to claim Social Security benefits. Do you have a health savings account to which you would like to keep contributing? If so, note that if youre age 65 or older, then receiving Social Security benefits requires you to sign up for Medicare Part A, and once you sign up for Medicare Part A, youll no longer be allowed to add funds to your HSA.

    The SSA also cautions that even if you delay receiving Social Security benefits until after age 65, you might still need to apply for Medicare benefits within three months of turning 65 to avoid paying higher premiums for life for Medicare Part B and Part D.

    In 2022, the average monthly premium for Part D will be $33 per month versus $31.47 in 2021. If you enroll in a Medicare Advantage plan, the average monthly premium will be $19 per month in 2022 versus $21.22 in 2021. However, if you are still receiving health insurance from your or your spouses employer, you might not yet have to enroll in Medicare.

    As of Oct. 16, 2021, Social Security offices are only open by appointment, and to get an appointment you need to be in a limited, critical situation. Most people will have to transact their business online, by phone, or through the mail.

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    Three Ways To Apply For Social Security

    If youre approaching retirement and youre thinking about how to start your Social Security benefits, you have three options for how to apply:

    • Go to your local Social Security office.
    • Open an account and apply online .

    Each approach offers some benefits and drawbacks, so consider which works best for you.

    Spouses Who Dont Qualify For Their Own Social Security

    Can I Apply For Social Security Retirement Benefits In Advance of Age 62

    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.

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    Filing A Weekly Claim

    To maintain Unemployment Insurance benefits, you are required to file weekly claims confirming that you continue to meet the requirements to receive Unemployment Insurance.

    You must file a claim every week you are unemployed, or underemployed.

    The benefit week starts on a Sunday and ends on Saturday.

    Learn about Arizonas work search requirements on the work search web page.

    Documents You Will Need

    Whether you apply online or in person, you will need the following information when you apply for your Social Security benefits:

    • Your Social Security number
    • Your W-2 forms or self-employment tax return for the last year you worked
    • Your military discharge papers if you served in any branch of the military

    If you choose to have your benefits paid through direct deposit, you will also need your bank’s name, your account number and your bank’s routing number as shown on the bottom of your checks.

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    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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