A Tool For Those Who Dont Have A Financial Adviser With Expertise In Social Security Benefits
If you dont have an adviser with expertise in Social Security benefits Id recommend using the online service of Social Security Choices. Weve compared various programs and found theirs to be the best.
Weve also negotiated a special rate special rate of $29.95 for Dollar Stretcher readers.
To get a customized report youll be asked to provide a little non-confidential information:
- an email address to deliver your report.
- years of birth for both you and your spouse or ex-spouse .
- an estimate of Social Security retirement benefits for you and your spouse or ex-spouse . You can get this information online from Social Security in a matter of minutes.
Once you have filled in all of your necessary information on SocialSecurityChoices.com, you will receive a 14 page report explaining the various options and your choices. You can see a sample analysis here.
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
What A Social Security Break
In a nutshell, a Social Security break-even calculator can tell you when the best age is to start taking Social security benefits, in terms of how much money you could expect to receive over time. Going back to the previous example, lets assume that you track your benefit amounts over a 10-year, 20-year and 30-year period. Heres how your total benefits received would look over each of those periods, for all three starting points.
Your cumulative benefits after 10 years:
- $144,000, starting at age 62
- $122,400, starting at age 66
- $52,800, starting at age 70
Your cumulative benefits after 20 years:
- $288,000, starting at age 62
- $326,400, starting at age 66
- $316,800, starting at age 70
Your cumulative benefits after 30 years:
- $432,000, starting at age 62
- $530,400, starting at age 66
- $580,800, starting at age 70
You can see that youd draw the most Social Security benefits in total if you wait until age 70 to start taking them, assuming you live to age 100. But that could be a big if when youre not in the best health.
What you have to keep in mind when using a Social Security break-even calculator is that the numbers are hypothetical. They dont take into things that could affect your ability to draw benefits or how far those benefits might go, such as:
Recommended Reading: How To Get An Activation Code For Social Security
When Is The Best Time To File For Social Security Benefits
Reading time: 3 minutes
Deciding the age at which you will begin to collect Social Security is likely to be a big factor in your retirement planning. Many retirees look forward to the day that they can apply for the benefits theyve spent their whole careers paying for. However, if you have a substantial nest egg and dont need the extra funds immediately, it may be in your best interest to wait a few years before claiming your benefits.
What Is Full Retirement Age
In addition to how much youve earned over the years, the size of your monthly Social Security benefit depends on when you were born and the age when you start claimingdown to the month.
Youll receive your full monthly benefit if you start claiming when you reach what Social Security considers your full retirement age , sometimes also referred to as normal retirement age. FRA was 65 when Social Security began, but it has been raised to 67 for anyone born in 1960 or later. To find your FRA, see the chart below.
|Finding Your Full Retirement Age|
You May Like: What To Do If They Steal Your Social Security
How To Calculate Your Social Security Break
Deciding when to take Social Security retirement benefits is important because it can directly affect your benefit amount. While you can technically start taking benefits as early as 62, youd receive them at a reduced amount. On the other hand, you could delay taking benefits up to age 70. Calculating your Social Security break-even age can help you decide when the best time is to begin taking benefits. You can do that using a Social Security break-even calculator. Additionally, it may behoove you to consult with a financial advisor about when its best for your particular situation to begin receiving Social Security benefits.
The Bottom Line On When To Start Social Security
Timing your Social Security benefits is a complex decision that will vary from person to person. Knowing the answers to the above questions will help you gauge when might be right for you, but consider speaking to a retirement professional, like a Certified Financial Planner , to map out when may be the right time to file for Social Security.
You May Like: How Is Social Security Pension Calculated
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.
Maximizing Social Security Survivor’s Benefits
Social Security survivor’s benefits provide a safety net to widows and widowers. But to get the most out of the benefit, you need to know the right time to claim.
While you can claim survivor’s benefits as early as age 60, if you claim benefits before your full retirement age, your benefits will be permanently reduced. If you claim benefits at your full retirement age, you will receive 100 percent of your spouse’s benefit or, if your spouse died before collecting benefits, 100 percent of what your spouse’s benefit would have been at full retirement age. Unlike with retirement benefits, delaying survivor’s benefits longer than your full retirement age will not increase the benefit. If you delay taking retirement benefits past your full retirement age, depending on when you were born your benefit will increase by 6 to 8 percent for every year that you delay up to age 70, in addition to any cost of living increases.
Local Elder Law Attorneys in Your City
You cannot take both retirement benefits and survivor’s benefits at the same time. When deciding which one to take, you need to compare the two benefits to see which is higher. In some cases, the decision is easyone benefit is clearly much higher than the other. In other situations, the decision can be a little more complicated and you may want to take your survivor’s benefit before switching to your retirement benefit.
For more information about when to take Social Security benefits, .
You May Like: What Age Can I Sign Up For Social Security
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.
Some People Who Take Social Security Early Are Misinformed And Impatient
- Print icon
- Resize icon
Many people claim Social Security earlier than the age at which they would receive 100% of what they are entitled to receive. In fact, roughly 50% of all working men claim at age 62, and nearly 70% have claimed before full retirement age.
And they do so for several reasons, according to Neha Bairoliya, an assistant professor at the University of Southern California and co-author of a recent paper that examined Social Security claiming decisions.
What are those reasons and what can those entitled to Social Security do to claim their benefits at a more optimal age? There are some legitimate reasons why someone might claim early. Some people might be unemployed and unable to find work again. Some might be in bad health. And still others might just want to kick back and enjoy their grandchildren.
But often, those who claim early are simply misinformed and impatient.
Theres a penalty?
Age matters when claiming Social Security benefits. But many according to Bairoliya and her coauthors research dont know that claiming before ones full retirement age results in a permanently reduced benefit. And for those whom it applies, early claimants receive a permanently reduced spousal benefit.
Rather, in terms of maximizing the present value of your Social Security benefits, it makes sense to delay claiming to age 70.
How might one do that?
You May Like: How Much Is Social Security Disability In Georgia
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. If you are still receiving health insurance from your or your spouses employer, however, then you might not yet have to enroll in Medicare.
On March 17, 2020, all Social Security offices were closed completely due to the COVID-19 pandemic. As of Aug. 5, 2021, they 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.
Merrill: Is Waiting Always The Right Answer
Storey: Waiting longer can increase the amount you receive over your lifetime, but whatâs right for you may be very different from whatâs right for me. Youâve got to consider your health and your family historyâhow long do people in your family tend to live, for instance? If your parents and grandparents didn’t live past 75, it could make sense to claim your benefits as early as age 62.
Your other retirement assets should also be considered: Claiming your benefits earlier might allow you to delay drawing income from your portfolio and give it more time to grow. Also think about your goals and the kind of lifestyle you want in retirement as well as your immediate financial needs. A family caregiving situation could arise that requires your attention and financial support.
If, after youâve considered all the factors, you feel that claiming your benefits before age 70 makes sense for you, you shouldnât feel bad about not waiting. Social Security was conceived as a safety net. And itâs only valuable if you use it when you need it.
Recommended Reading: How Much Do I Have To Pay Into Social Security
Children Can Collect Social Security Benefits Too
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. As long as the disability prevents the person from working, the adult child can continue collecting the benefit even after the parent has died.
The Downside Of Claiming Early: Reduced Benefits
Consider the following hypothetical example. Colleen is 62 as of 2022. If Colleen waits until age 67 to collect, she will receive approximately $2,000 a month. However, if she begins taking benefits at age 62, she’ll receive only $1,400 a month. This “early retirement” penalty is permanent and results in her receiving up to 30% less year after year.
However, if Colleen waits until age 70, her monthly benefits will increase another 24% over what she would receive at her FRA, to a total of $2,480 per month.1 If she were to live to age 89, her lifetime benefits would be about $112,000 more, or at least 24% greater, because she waited until age 70 to collect Social Security benefits.2
Recommended Reading: Has Someone Used My Social Security Number
Ask Larry: What Is The Best Month Of The Year To Start Social Security Benefits
Economic Security Planning, Inc.
Today’s column addresses questions about the best time to file, lump sum payments and benefit rates, earnings after 70, when public pensions affect benefits and calculating benefit amounts. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc, a company that markets Maximize My Social Security and MaxiFi Planner.
What Is The Best Month Of The Year To Start Social Security Benefits?
Hi Larry, I turned 66 in July and have not applied for my Social Security benefits. I’ve been told that it is critical to apply at a certain time of the year of the year to get the full benefit of the recalculation each year while I’m still working. I will work until 70, at my highest income level, which will make up for those lean years as they drop out of the calculations. What month of the year is the best time to begin Social Security? Thanks, Carl
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.
Read Viewpoints on Fidelity.com: Your bridge to Medicare
How Confident Do You Feel Betting On Your Own Health
Your monthly Social Security benefit is calculated based on the wages you earn during your top 35 years in the workforce. From there, you’re entitled to collect that benefit in full once you reach full retirement age, or FRA. FRA hinges on your year of birth, and if you were born in 1960 or later, it’s 67.
Of course, you don’t have to claim benefits at FRA. You can sign up starting at age 62, but for each month you file ahead of FRA, your monthly benefit gets reduced. On the other hand, if you hold off on filing past FRA, your monthly benefit will grow by 0.66% percent a month, which amounts to 8% a year. If your FRA is 67 and you wait until 70 to sign up for Social Security, your monthly benefit will end up 24% higher — and that boost will remain in effect for the rest of your life. Talk about tempting.
But despite the upside of claiming Social Security at 70, it may better suit you to file at a younger age. Here’s why.