Wednesday, August 10, 2022

When Do You Have To Take Social Security

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Delay Taking Social Security If You Are Healthy

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If you are in great health at age 62, then its best to delay Social Security. If you are a single person in poor health, you should file for Social Security benefits as soon as you are eligible.

For every year you delay taking Social Security, youll get an extra 2/3 of 1% for each month after your birthday month. This adds up to 8% for each full year you wait until age 70. Actuarially, its financially more beneficial to start taking Social Security between 68 70.

The full retirement age for Social Security benefits is 66 if you were born from 1943 to 1954. The full retirement age increases gradually if you were born from 1955 to 1960 until it reaches 67. For anyone born in 1960 or later, full retirement benefits are payable at age 67. The IRS has a whole PDF about our nations retirement benefits.

Once you reach full retirement age, the delayed benefits start accruing at the beginning of your birth month. For example, if you were born on February 18, youd reach your full retirement age on February 1. If you wait until April to take your benefits, youll get 101.4% of your full retirement benefit. Wait one year and youll get 108% of your benefits.

You can earn delayed credits until age 70, when youd receive 132% of your full retirement benefit. For example, if youd receive $1,500 per month at your full retirement age of 66, delaying your benefits to age 70 would boost your monthly check to $1,980.

Should You Plan To File At 70

Clearly, waiting until age 70 to claim Social Security will result in your highest possible monthly benefit. But that doesn’t mean that by doing so you’ll wind up with your greatest total lifetime benefit. One thing many people don’t know about Social Security is that it’s designed to pay you the same lifetime amount regardless of when you first file. The logic is that while filing early reduces each payment you get, it also increases the number of payments you get. Conversely, waiting until 70 to take benefits decreases the number of payments you get, but boosts each individual payment.

This formula, however, operates under the assumption that you’ll live an average lifespan. If your health is poor, you could end up losing money by waiting until 70 rather than filing earlier. Therefore, if you’re in your early to mid-60s and are diagnosed with an illness that shortens your lifespan, or just don’t have great health to begin with, it generally pays to file as soon as possible.

There are other reasons not to wait until 70 for Social Security. If you lose your job prematurely or come to need the money, you’re better off taking your benefits sooner than racking up costly credit card debt. Furthermore, if you don’t need the money in your early to mid-60s, but rather want the money to travel or enjoy the earliest stages of retirement when your health is optimal, it often pays to file earlier than 70, provided you have a healthy nest egg to fall back on.

Youre Planning Your End

Your Social Security benefits stop paying at your death, so if you die prior to collecting benefits, youll have missed out on benefits entirely. You need to figure out how to maximize your Social Security income, instead. For example, say youre planning to wait until age 70 so you can claim the larger monthly benefit. If you die right before your 70th birthday, you wont receive any benefits. Its very difficult to predict how long youll live, especially if youre in good health now. However, if you are suffering from a terminal or serious illness, the increased monthly benefit for delaying Social Security might not be worth it.

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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.

There Are Social Security Survivor Benefits For Spouses And Children

Learning how to take Social Security based on your marital status can ...

If your spouse dies before you, you can take a Social Security survivor benefit. However, that won’t be in addition to your own benefit. You must choose one or the other. If you are at full retirement age, that benefit is worth 100% of what your spouse was receiving at the time of his or her death .

A widow or widower can start taking a survivor benefit at age 60. However, the payment will be reduced because it’s taken before full retirement age. If you remarry before age 60, you are not eligible for a survivor benefit. If you remarry after age 60, you may be eligible for a survivor benefit based on your former spouse’s earnings.

Eligible children who are under age 18 or were disabled before age 22 can also receive a Social Security survivor benefit. It would be worth up to 75% of the deceased’s benefit.

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The Second Best Choice

Single Social Security claimants who want to hold off until age 70, but find they cant quite wait any longer should select age 69 for the best trade off, according to Christopher Jones, chief investment officer at Edelman Financial Engines.

That sacrifice may be as little as a few thousand extra dollars in additional lifetime benefits in exchange for starting a year earlier, according to Jones.

If youre single, well tell you you should wait until 70, Jones said. It is generally preferable to do so.

“But its not quite as critical as it is going from 66 to 67, or 67 to 68.

In a low interest rate environment, it’s hard to beat the potential increases for every year you delay claiming your benefits, Jones said.

Thats a guaranteed real rate of return backed by the federal government, Jones said. You cant get real rates of return at 6% to 8% right now not even close in the marketplace.

Youll Get A Bigger Monthly Social Security Check If You Wait Until 70

Claiming Social Security before you reach full retirement age will result in a reduction in benefits as much as 25% to 30% less than you would have received if you had waited. That reduction is permanent.

Instead, if you wait to take your benefits until after your FRA, Social Security will add an 8% delayed retirement credit to your eventual monthly payout each year you hold off, up until age 70.

Thats a guaranteed return of 8% per year of deferral after your FRA, which could be more than you might receive with any other fixed products right now. Its definitely more than the cost of living adjustments that Social Security beneficiaries have been getting for the past decade, which have averaged about 1.5% a year.

Those COLA increases are not always enough to keep up with true inflation. And, when there is a COLA for Social Security, it may be coupled with a Medicare premium increase.

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Signs That You Will Be Approved For Disability Benefits

If you apply for Social Security disability benefits, it can often seem like an endless waiting game. You are likely nervous and anxious about whether or not your claim will be approved. If you have already hired a disability attorney, they can assist you with the process and offer legal advice about your chances of success. But, there are also some signs you can watch for on your own to determine whether your disability claim will likely be approved. Keep reading as we give you seven signs your disability claim will be approved.

  • How do I know if I am eligible for disability?
  • Taking Social Security When Youre Married Or Single

    How much your Social Security benefits will be if you make $30,000, $35,000 or $40,000

    Heres where deciding when to take Social Security gets a little tricky. First of all, know that if you die single and childless, all the Social Security you would have received after age 62 will go to nobody. Unlike a will or revocable living trust, the government doesnt pay out your Social Security benefits to someone of your choice. The government simply smiles and reabsorbs your money. Im not sure why there is not a bigger objection given it is our money.

    Therefore, before you die, you may strategically want to get married to someone to protect both of your Social Security benefits. Its too bad the government is not more magnanimous with survivors benefits. How amazing would it be to designate your survivors benefits to a charity you really care about.

    Like potentially eliminating the stepped-up basis, the government reabsorbing your Social Security payments if you die single and childless are signals to lookout for yourself in retirement.

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    Social Security And Children

    Children also become eligible for monthly benefits when one or both of their parents retire, become disabled or die, but they must meet certain criteria. For example, when a parent retires, the child must be unmarried, under age 18 or be disabled from a disability that started before age 22. .

    Any benefits paid to your children will not decrease your retirement benefit. In fact, the value of the children’s benefits, added to your own, may help you decide if taking your retirement benefits sooner may be more advantageous.

    Within a family, each qualified child may receive a monthly payment of up to one-half of your full retirement benefit amount, but there is a limit to the total amount paid to family membersgenerally, 150 to 180 percent of your full retirement benefit.

    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 Social Security Calculates Your Benefit

    The amount you receive in Social Security benefits is based on an average of your 35 highest-earning years. So if you’re earning more now than ever before, your best bet is to keep working, if that’s possible, and delay receiving benefits until age 70. You’ll then be eligible for your maximum benefit.

    On the other hand, if you keep working but start taking benefits early, you may run up against the Social Security income limits. For 2021, Social Security will deduct $1 of every $2 you earn over $18,960 if you are under your full retirement age. During the year you reach full retirement age, it will deduct $1 for every $3 you earn over $50,520 until the month you reach full retirement age. After that, you’ll receive your entire benefit.

    Note that any money Social Security withholds from your benefit isn’t lost forever. After you reach full retirement age, Social Security will recalculate your benefit and increase it to account for the benefits that were withheld earlier.

    The reduction in Social Security benefits for people who earn over a certain amount is based only on earned income. Unearned income, such as from pensions or investments, doesn’t count.

    Why Not Claim Early Rather Than Draw Down An Ira And Other Savings

    How Long Do You Have to Wait to File a Claim for Social Security ...

    Its conventional wisdom to delay tapping an individual retirement account, instead enabling it to grow tax deferred. Roughly 40 percent of beneficiaries claim reduced Social Security benefits at 62 or 63.

    But many researchers say reversing the order living on retirement savings in the early years and holding off on collecting benefits is likely to increase monthly income over a lifetime.

    One reason, experts say, is the roughly 77 percent boost in benefits a beneficiary receives by claiming at 70 rather than at 62.

    Another is the difference in how I.R.A. withdrawals and Social Security benefits are taxed. Individuals pay the ordinary federal income tax rate on all I.R.A. withdrawals. But just 85 percent, 50 percent or none of their Social Security benefits are taxed.

    The amount subject to tax depends on your provisional income, which includes half of benefits and 100 percent of nonbenefit income. The more I.R.A. income, the more likely you are to pay at a higher marginal rate and be taxed at the 85 percent threshold.

    With this formula in mind, a new retiree should start I.R.A. withdrawals early, when the marginal rate is likely lower, said Laurence Kotlikoff, an economics professor at Boston University.

    Consider a person who is due a $2,200 monthly Social Security benefit at full retirement age. Her $500,000 I.R.A. and $200,000 in other savings are expected to grow at an inflation-adjusted 2 percent a year.

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    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.

    Do You Have An Immediate Use For The Money

    One of the most common reasons for taking Social Security early is simply because you need it. If your Social Security benefit is the only way you can keep the lights on, then its reasonable to file for it when you need it. However, its important to remember that working longer in your 60s to delay Social Security may be far easier than living on a reduced benefit in your 80s, especially if youre physically able to work now.

    But what if you have no immediate use for the money but think you might be able to manage it better than Uncle Sam? Your Social Security benefit can feel like free money you can take now to grow into larger retirement income later. But Weston and Kate Horrell, an Accredited Financial Counselor and the founder of, dont see this as the optimal use of your Social Security benefit.

    You may invest your Social Security income, but it does not count as earned income to be placed into an individual retirement account , Horrell points out. That means if Social Security is your only income, you may not be able to contribute to an IRA, and if it isnt, youll be limited to the lesser of $7,000, the IRA contribution limit for those over 50, or the amount you make outside of Social Security.

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    What Happens If You Delay Past 70

    If you don’t start your benefits once you reach 70, you can apply to receive up to six months’ worth of payments retroactively. But there’s no benefit in doing so. Delayed retirement credits stop once you reach 70, so you won’t get more money by holding out longer. Wait longer than six months and you’ve permanently forfeited those benefits you earned.

    It’s important to note that your benefits won’t be affected if you’re still working, since you’re past full retirement age. In fact, working longer could even boost your future checks. Social Security calculates benefits based on your 35 highest-earning years. If you’re able to replace a lower-earning year with a higher-earning year, your benefit could increase since its calculated annually. But because you’ll be earning more money, more of your Social Security will be taxable.

    Whats Your Social Security Break

    Do you have to pay taxes on your Social Security? (maybe not)

    If youre looking to maximize your total lifetime Social Security payout, youll want to conduct a break-even analysis to determine when you should start drawing your benefits.

    Your break-even age occurs when the total value of higher benefits starts to exceed the total value of lower benefits .

    For example, if you are eligible to collect a reduced $900 benefit at age 62 plus 1 month, and your benefit would increase to $1,251 at age 65 and 10 months, your estimated break-even age is 75 years and 5 months.

    If you expect to live beyond that age, it could make financial sense to delay drawing benefits. The Social Security Administrations life expectancy calculator can help you decide.

    When it comes to calculating a start date for Social Security benefits, however, theres not an age thats appropriate for everyone. Consider your own financial needs, health and other retirement plans before making the call. If you cant reasonably afford to live without taking benefits, it may make little sense to delay taking your benefit.

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