Before You Make Your Decision
There are advantages and disadvantages to taking your benefit before your full retirement age. The advantage is that you collect benefits for a longer period of time. The disadvantage is your benefit will be reduced. Each person’s situation is different. It is important to remember:
- If you delay your benefits until after full retirement age, you will be eligible for delayed retirement credits that would increase your monthly benefit.
- That there are other things to consider when making the decision about when to begin receiving your retirement benefits.
Who Counts As A Survivor
The most common reason youd qualify for benefits is when your spouse or ex-spouse dies. However, certain other family members may also be eligible.
Widows and Widowers
If youre a surviving spouse and you were married for at least nine months, you can receive:
- 100% of your spouses benefit if you wait until your full retirement age.
- Between 71.5% and 99% of your late spouses benefit if you claim early. You can start benefits as early as age 60, or 50 if youre disabled.
- 75% of your late spouses benefit, regardless of your age, if youre caring for their child whos 16 or younger, or who is disabled.
You can claim an ex-spouses Social Security whether theyre living or dead if the marriage lasted at least 10 years and youve been divorced for at least two years. Benefits are generally calculated the same way for spouses and ex-spouses. You can receive:
- 100% of your ex-spouses benefit if you wait until your full retirement age.
- Between 71.5% and 99% of your ex-spouses benefit if you claim early. You can start benefits as early as age 60, or 50 if youre disabled.
- 75% of your ex-spouses benefit, regardless of your age, if youre caring for their child whos 16 or younger, or who is disabled.
The rules for current and ex-spouses are pretty similar: Both can claim up to 50% of a living workers full retirement benefit.
But the rules change when the worker dies: Both current and ex-spouses are eligible for up to 100% of that persons benefit.
Bridge To Medicare At Age 65
Remember that while you are eligible for reduced Social Security benefits at 62, you won’t be eligible for Medicare until age 65, so you will probably have to pay for private health insurance in the meantime. That can eat up a large chunk of your Social Security payments.
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Social Security Disability Programs
In addition to retirement benefits, the Social Security Administration manages two programs that provide benefits to people who are disabled or blind.
- Social Security Disability Insurance Program
- SSDI supports disabled or blind individuals by providing benefits based on their workers contributions to the Social Security trust fund. Your contributions are based on your earnings or your spouses or parents earnings while in the workforce. Your dependents may also be eligible for SSDI benefits based on your earnings.
- Supplemental Security Income Program
- SSI benefits are paid out as cash assistance to people with limited incomes and resources who are elderly, blind or disabled. These benefits may also include blind or disabled children. SSI payments are a federal benefit funded by the general fund of the United States not the Social Security trust fund. Some states provide additional state supplemental benefits in addition to the federal SSI payments.
In some cases, people may be eligible for both SSI and SSDI at the same time. The Social Security Administration calls these concurrent benefits. This can happen when a disability qualifies you for Social Security Disability Benefits, but you only get a small amount of monthly SSDI benefits. This may qualify you to receive SSI benefits as well.
Comparing SSDI and SSI Programs
|Up to 85%|
Income Taxes for Other Benefit Programs
Benefits Of Delaying Social Security
When to start collecting Social Security depends on each retiree’s unique situation. The longer you wait to start collecting, the larger your monthly check will be.
Also, if you wait until full retirement age to collect, you can earn any amount of money and it won’t reduce your monthly benefits. You can start receiving benefits at 62, even if you’re still working, but here’s the catch. If you start benefits prior to full retirement age, you can only earn up to $18,960 and still get your full benefits. Once you earn more than the limit, Social Security deducts $1 from your benefits for every $2 you earn.
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Social Security May Be Taxable
Depending on your income level, your Social Security benefit may be subject to taxation. The chart below illustrates how your combined income can impact whether your Social Security retirement benefit is subject to taxation.6
Will Your Social Security Benefits Be Subject to Federal Income Taxes?6
|Combined Income Greater Than $44,000|
This potential income tax exposure may have substantial implications for whether you choose to work during retirement, how your assets are invested, and the timing of withdrawals from other retirement accounts.7,8
For instance, a withdrawal from a traditional IRA may lift your income beyond the thresholds described above, subjecting a higher proportion of your Social Security to income tax.7,8
The same is true of investment earnings in non-retirement savings. Retirees who have investment earnings in excess of their current spending needs may be subjecting their Social Security income to taxation. Shifting a portion of those assets to a tax-deferred instrument, such as a fixed annuity, may be one way to manage taxation on your Social Security benefit.9
So You Think You Can Do Better
Now, Ive heard things like that for a while, but Ive never gotten into the numbers to see what was really possible. SoI decided it was time for a closer look.
Lets consider someone with a $2,000 benefit at their full retirement age. For this example, well assume full retirement age is 67.
You can file as early as 62 and get $1,400 or as late as 70 and get $2,480.
Lets look at two scenarios: First one is where you need to start your income at 67 and the other is where you need to start your income at 70.
In both cases, Ill assume that you file for benefits at 62. That benefit has a 2% cost of living adjustment applied and that you invest the monthly benefits check.
Heres how that investment would accumulate at various rates of return from the beginning if age 62 to the beginning at age 67:
First, lets assume you didnt make anything. That $1,400 would be worth $87,427. At 4, 6 and 8 percent it would gradually increase and the highest rate of return I assumed was 10 percent where your balance would be $116,985. These amounts would be the available balance to use in supplementing your income.
So now lets look and see what the income gap would be after we adjust for the annual cost of living adjustments. Your benefit would start at $1,400, but by age 67, it would be approximately $1,546 if there was a 2% annual COLA.
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You Can Choose When You Take Social Security
You have considerable flexibility for when you can begin receiving your benefits.
As the accompanying illustration shows, the age at which full retirement benefits are payable , is determined by your birth year.3
Age for Receiving Full Social Security Retirement Benefit3
|Year of Birth|
|1960 or later||67|
You may begin receiving benefits as early as age 62 though, your benefits will be reduced at a rate of about one-half of 1% for each month you begin taking Social Security before your full retirement age.4
You may choose to delay receiving benefits until after reaching your full retirement age in which case, your benefits are scheduled to increase by 8% annually. This increase under current law will be automatically added each month from the moment you reach full retirement age until you start taking benefits or reach age 70 the age at which these delayed retirement credits stop accruing. Plus, your benefit also will increase by any cost-of-living adjustments applied to benefit payment levels during that time.4
If you plan on continuing to work, you may still receive the full benefit for which you are eligible. Indeed, working beyond full retirement age can increase your benefits. However, your benefits will be reduced if your earnings exceed certain limits. If you work and start receiving benefits before full retirement age, your benefits will be reduced by $1 for every $2 in earnings above the prevailing annual limit .5
Social Security Benefits If Youre Married
Determining Social Security calculations is a bit more complicated if you are married because you have the option to base benefits on your spouses salary history.
If the lesser earning spouses benefits are based on the higher earning spouses, then the limit of those earnings will be 50 percent of the higher earning spouses benefit amount.
To illustrate this, lets talk about A and B, a married couple.
- A makes significantly more money than B.
- A makes so much more money that As monthly Social Security benefits are going to be more than twice of Bs, based on Bs salary history.
- The good news for B is that they can choose to have their Social Security benefits based on As salary history and can receive as much as 50 percent of As monthly benefit. This is the case even if B didnt hold a job outside the home.
On the other hand, if Bs monthly benefit would have been more than half of As, based on Bs salary history, then B can claim that amount.
In short, B can claim the higher of these two possibilities: Bs own Social Security earnings or half of As.
This all assumes that B doesnt begin claiming benefits until B reaches full retirement age. If B begins claiming earlier, then Bs benefits will be less. In addition, if B is claiming benefits based on As earnings, then B does not benefit by waiting later than full retirement age.
B will not be given more monthly benefits if B waits until age 70, for example, based on As earnings.
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If You Were Born Between 1943 And 1954 Your Full Retirement Age Is 66
You can start your Social Security retirement benefits as early as age 62, but the benefit amount you receive will be less than your full retirement benefit amount.
The chart below provides examples of the percentage of your full retirement benefit amount you and your spouse would receive from age 62 up to your full retirement age.
Social Security Benefits For Workers Turning 60 In 2020 Will Very Likely Drop Due To The Coronavirus Pandemic
As a result of the COVID-19 pandemic, about 3 million retired workers who turn 60 years old in 2020 will very likely have much lower lifetime Social Security benefits than previously expected. Without legislative changes, the average earner stands to lose nearly $1,500 per year for the rest of their life. Fortunately, there is a simple legislative changeexplored in detail belowthat would fix these problems without lowering the benefits of any other cohort of retirees. Chairman of the U.S. House Ways and Means Social Security Subcommittee, Rep. John Larson , has introduced such legislation*and Congress should fix this situation as soon as possible.
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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.
When It Makes Sense To Collect Before Full Retirement Age
If you take early Social Security, you start collecting retirement benefits before you reach full retirement age. That’s age 66 or 67, depending on the year you were born.
You can start to collect Social Security retirement benefits as early as age 62, but your monthly check will be lower than if you wait until your full retirement age. You get the largest benefit if you wait until age 70 to collect. Still, there are several situations when taking Social Social early makes senseeven if it means a smaller check.
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How To Calculate Social Security Benefits
Lets say your FRA is 66. If you start claiming benefits at age 66 and your full monthly benefit is $2,000, then youll get $2,000 per month. If you start claiming benefits at age 62, which is 48 months early, then your benefit will be reduced to 75% of your full monthly benefitalso called your primary insurance amount. In other words, youll get 25% less per month, and your check will be $1,500.
That reduced benefit wont increase once you reach age 66. Rather, youll continue to receive it for the rest of your life. It may go up over time due to cost-of-living adjustments , but only slightly. You can do the math for your own situation using the Social Security Administration Early or Late Retirement Calculator, one of a number of benefit calculators provided by the SSA that can also help you determine your FRA, the SSAs estimate of your life expectancy for benefit calculations, rough estimates of your retirement benefits, individualized projections of your benefits based on your personal work record, and more.
But Wait What Social Security Benefit Can I Claim And When
Smiling retired couple looking at adorable dog while resting in park
A Reference Guide for Social Security Benefits
Many people are not aware of the Social Security benefits they are entitled to. I understand why they dont its very confusing. Heres a straightforward, easy-to-reference guide to the various benefits available to you that will enable you to make an informed and correct claiming strategy.
Lets start with a holistic approach:
Lets talk about your own retirement benefit:
- You are always paid your retirement benefit first if you have one.
- The earliest you can apply for benefits is age 62.
- Its the only benefit that accrues delayed retirement credits.
- The Annual Earnings Limitation applies before full retirement age.
- The Windfall Elimination Provision may apply if you have another government pension.
- You can voluntarily suspend your own retirement benefit at our full retirement age.
- There is no reason to wait past 70 to file for benefits.
Spousal Benefits only apply to your current spouse:
The MAXIMUM spousal benefit at your own full retirement age is equal to 50% of your spouses Primary Insurance Amount if they are collecting their own retirement benefit. If your own retirement benefit is greater than 50% of your spouses Primary Insurance amount, you will not receive a spousal benefit.
Spousal Benefits in cases of divorce:
The MAXIMUM ex-spousal benefit is the same as the current spousal benefit described earlier.
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Social Security Can Be A Family Benefit
When you start receiving Social Security, other family members may also be eligible for payments. A spouse qualifies for benefits if they are age 62 or older or at any age if they are caring for your child.
Benefits may also be paid to your unmarried children if they are younger than 18, between 18 and 19 and enrolled in a secondary school as a full-time student, or age 18 or older and severely disabled.
Each family member may be eligible for a monthly benefit that is up to half of your retirement benefit amount. There is a family limit, which varies, but is generally between 150% to 180% of your retirement benefit.10
Should you die, your family may be eligible for benefits, based on your work record.10
Family members who qualify for benefits include:
- A widow or widower
- age 60 or older
- age 50 and older if disabled or
- any age if they are caring for your child who is younger than 16 or disabled and entitled to Social Security benefits on your record.
Your survivors receive a percentage of your basic Social Security benefit usually in the range of 75% to 100% for each member though, the limit paid to each family is about 150% to 180% of your benefit rate.10
Report The Death Of A Social Security Or Medicare Beneficiary
You must report the death of a family member receiving Social Security or Medicare benefits. The Social Security Administration processes death reports for both. Find out how you can report a death and how to cancel benefit payments. In addition to canceling SSA and Medicare benefits, find out what other benefits and accounts you should cancel.
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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.