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
Learn why Social Security at 62 might not be a bad idea. Social Security 101
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 youll 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.
You might think that waiting for bigger benefits is better, but thats 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.
Tax Considerations For Social Security Benefits
How do these tax considerations affect when you should apply for Social Security benefits? At todays , they may not have much of an impact on most people. Still, tax rates and income thresholds can change, so its worth remembering that you will lose less of your Social Security to taxes if you are in a lower marginal tax bracket when you begin to collect.
You should also note that if you decide to return to work, even part-time, and arent yet at your FRA, your Social Security benefits may be temporarily reduced. The reduction is $1 for every $2 of earned income over $18,960 in 2021 . During the year when you reach your FRA, your benefits will be reduced by $1 for every $3 in income over $50,520 in 2021 until the month when you become fully eligible. That money isnt lost, however. The SSA will credit it to your record when you reach your FRA, resulting in a higher benefit.
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Factors That Affect Social Security Benefits
The math seems to say that everyone should wait until age 70 to reap the best benefits, but this isnt always the case. There are times when it might make sense to start collecting earlier. If, for example, you are in poor health or if the family breadwinner is ill and can no longer work, collecting before your full retirement age could help prevent debt from mounting up.
Your marital status also plays a factor. If youre single and in poor health, you could end up using your savings to pay for medical bills between the ages of 66 and 70. In this case, you might be better off collecting Social Security benefits at a lower rate than holding out for the higher payments youd receive at age 70.
If, however, youre single, in good health and either still working or have plenty of savings, consider waiting until age 70 in order to benefit from the higher payments.
With married couples, it could be best for the spouse who earns the most money to hold off until 70, while the spouse who makes less starts collecting at 62. This approach will ensure that when one of you passes away, the surviving spouse will receive the higher benefitsgenerally the amount their spouse would have received at age 70, even if the spouse died before that age.
For more help with retirement planning, consider contacting a Certified Financial Planner. They can help you ensure youre maximizing your Social Security benefits and answer any questions you have about your other assets.
Do Social Security Benefits Start The Month Of Your Birthday
When To Enroll in Retirement BenefitsThe choice to begin accepting benefits as early as allowed versus delaying until full retirement age or later is a personal one. Regardless of the age you choose to collect, the payment schedule hinges on the month of your birthday. In the case of family survivors, the point of reference is the birthday of the deceased who earned enough credits for the family to be eligible for survivor benefits.
Schedule of SS paymentsSocial Security benefits are not prorated. They start the month following the birthday. The schedule, according to AARP, follows this rule: When the birth date falls between the 1st and 10th of the month, the payment is issued on the second Wednesday of the month following the birthday month. For birth dates between the 11th and 20th of the month, expect to be paid on the third Wednesday after the birthday month. For birth dates from the 21st through the last date of the month, recipients will have to wait until the fourth Wednesday of the month that follows the birthday.
Consequences of Early RetirementThe reason people struggle with the decision of whether to collect at age 62, full retirement or 70 is the exponential difference in benefits. Contrary to what some believe, 66 is not always the full retirement age as defined by the SSA. Retirement age varies with the beneficiarys year of birth, ranging anywhere from age 65, for retirees born in 1937 or earlier, to age 67 for those born in 1960 or later.
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Exceptions To The Usual Schedule
Your payment will arrive on an alternate schedule if you fall into certain categories. It will be made on the third day of the month if:
- Your state is paying your Medicare premiums
- You started receiving benefits prior to May 1, 1997
- You reside in another country
- You’re receiving both Social Security benefits and SSI payments
But there’s an exception to the Social Security/SSI rule. You’ll receive payment on the first of the month rather than the third day if you’re receiving SSI due to disability, blindness, or age.
SSI is needs-based. It’s not something you paid into over the course of your working career, like Social Security retirement or disability benefits or Medicare, so it’s possible to collect for these reasons without also receiving Social Security retirement or disability benefits. SSI is intended to pay for basic food, shelter, and clothing needs.
Your payment will come the weekday just before the usual date if your payment date falls on a weekend or a federal holiday.
You can find calendars on the Social Security Administration’s website, Schedule of Social Security Benefit Payments 2021, to pin down the exact dates in 2021 depending on your circumstances.
Gaining Back The Reduction In Benefits From Working
The amounts of early retirement benefits you lose as a setoff against your earnings are not necessarily gone forever. When you reach full retirement age, Social Security will recalculate upward the amount of your benefits to take into account the amounts you lost because of the earned income rule. The lost amounts will be made up only partially, however, a little bit each year. It will take up to 15 years to completely recoup your lost benefits. And remember, none of this readjustment will change the permanent percentage reduction in your benefits that was calculated when you claimed early retirement benefits .
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Can I Keep A Job Even After I Start Collecting Retirement Dependents Or Survivors Benefits
Yes, and many people do just that. People who are past full retirement age may work and earn any amount without losing any of their Social Security benefits.
But before you reach full retirement age, Social Security will subtract money from your benefit check if you exceed a certain amount of earned income for the year . The limit applies only to earnings from work it does not apply to income from such things as savings, investments, pensions, or rental property. In other words, earnings from these sources will not affect your Social Security benefits.
The Social Security Administration has added a special twist for the year in which you reach full retirement age. During the 12 months prior to your birthday, you will lose one dollar of benefits for every three dollars you earn over a set monthly limit . After your birthday, you can earn any amount of money without losing benefits.
Claiming Social Security Benefits At The Right Time Means More Money In Your Pocket Here’s A Guide To Everything From Knowing Your Full Retirement Age To Taking Social Security Spousal Benefits
For many Americans, Social Security benefits are the bedrock of retirement income so maximizing this stream of income is critical.
The rules for claiming Social Security benefits can be complex, but this guide will help you successfully navigate the details. Educating yourself can ensure that you claim the maximum amount to which you are entitled.
Here are 12 essential details you need to know.
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Children Can Also Collect Social Security Benefits
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. The adult child can continue collecting the benefit even after the parent has died, as long as the disability prevents them from working.
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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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.
Although the cost-of-living adjustments announced each year are usually only slight increases, Social Security benefits will increase by 5.9% in 2022, marking the largest increase since 1982.
Retirement Age For Those Born After 1937
Year Born 1960 or later 67 years
The system does provide for early retirement at age 62, but also offers higher benefits for people who wait to make their claims after reaching full retirement age. For more information, see Nolo’s article Social Security Benefits: Retirement, Disability, Dependents, and Survivors.
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What Else Affects Your Retirement Benefits
Everyones retirement is unique. Beyond deciding when to begin receiving retirement benefits, other factors that can affect your benefits include whether you continue to work, what type of job you had, and if you have a pension from certain jobs.
Continuing To Work
You can choose to keep working beyond your full retirement age. If you do, you can increase your future Social Security benefits. Each extra year you work adds another year of earnings to your Social Security record. Higher lifetime earnings can mean higher benefits when you choose to receive benefits.
Specific Types Of Earnings
While Social Security earnings are calculated the same way for most American workers, there are some types of earnings that have additional rules.
Earning types with special rules include:
Pensions And Other Factors
Pensions and taxes have the potential to impact your retirement benefit. Review the resources below on pensions and other factors you should consider:
- Windfall Elimination Provision : If you have a pension from a job for which you didnt pay Social Security taxes, this policy may lower your retirement benefits.
- Government Pension Offset : This policy affects benefits as a spouse, widow, or widower if you have a pension from a government job for which you didnt pay Social Security taxes.
- Income Taxes And Your Social Security Benefits: You might have to pay federal income taxes on your Social Security benefits in certain situations.
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.
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Apply For Retirement Benefits
Starting your Social Security retirement benefits is a major step on your retirement journey. This page will guide you through the process of applying for retirement benefits when youre ready to take that step. Our online application is a convenient way to apply on your own schedule, without an appointment. You can also apply by phone or by appointment at a Social Security office.
Youre 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 youre working part-time to help make ends meet, taking Social Security at 62 might make sense.
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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.
Social Security Disability Spousal Benefits
The spouse of a disabled worker may qualify for benefits. To qualify, the spouse must be:
- At least 62 years old
- Any age and care for the spouses child who is under age 16 or disabled
The spousal benefits begin when the disabled workers benefits start. It ends at the death of the disabled worker or the spouse, or when the SSA determines that the person no longer qualifies.
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