Will Taking Social Security At Any Time Affect My Medicare
Though they are separate programs, there are some beneficial connections between them.
If you’re receiving Social Security benefits, Social Security works with Medicare and you’ll get an initial enrollment package from Medicare 3 months before the month of your 65th birthday.
Also, your Medicare premiums will most likely be collected by Social Security if you are already receiving those benefits. Social Security will send a notice before the deductions begin. If you arent receiving Social Security retirement benefits, you’ll get a monthly bill from Medicare.6
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.
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Bridge To Medicare At Age 65
Remember that while you are eligible for reduced Social Security benefits at 62, you wonât 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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Tips For Ensuring A Comfortable Retirement
- If you want to build a retirement plan, a financial advisor can help you reach your retirement goals. SmartAssets free tool can pair you with advisors in your area based on your needs. Get started now.
- Save, save, save. To be able to put off taking Social Security benefits until youre 70, youll need to have enough stashed away to live off of until then. Our retirement calculator can help you figure out how much youll need to save to retire comfortably.
- Start saving early, and take advantage of employer matches. With our 401 calculator, you can see how much your 401 will be worth when you reach retirement.
- Think hard about where you want to retire. Not all states are equally tax-friendly to retirees. Use our retirement tax-friendliness tool to see how tax-friendly your home state is, and whether Social Security benefits are taxable at the state level there.
Delay Starting To Collect Benefits
Each of us can start collecting our benefits as early as age 62 and as late as age 70. For each of us, there’s a full retirement age in between, at which we can collect the full benefits to which we’re entitled, based on our earnings history. If you start collecting your benefit checks before your full retirement age, they will be smaller . Conversely, for each year beyond your full retirement age that you delay , they’ll grow about 8% bigger .
The table below shows how much of your full benefits you’ll receive, depending on when you start collecting:
Start Collecting at:
Data source: Social Security Administration.
Not everyone can afford to delay some will simply need that retirement income as soon as they can get it, perhaps due to an unexpected job loss or health setback. But if you can delay, it will boost the size of your benefit checks.
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Who’s The Higher Earner
Compare the estimates for you and your spouse, and pay special attention to the difference between your estimates. The higher earner is the spouse with the larger primary insurance amounts .
When you’re deciding who will collect first and who should wait, consider having the lower earner collect first and having the higher earner wait. Over time, the higher earner’s increases will be worth more than the lower earner’s increases.
And if one spouse’s estimates are more than twice as high as the other’s, it might make sense for both of you eventually to collect on the same spouse’s earnings record.
In that situation, the spouse with the lower benefits can claim first based on his or her own earnings record and apply for spousal benefits later when the spouse with the higher benefits starts to collect.
The longer the spouse with the higher benefit waits to start collecting, the higher benefits will be for both spouses. Delaying the higher earning spouse’s benefits could also eventually increase the other spouse’s survivors benefits.
How Can I Increase My Monthly Retirement Benefits
If you can wait until after your full retirement age to collect benefits, your benefit amount will increase each month until you turn 70. These monthly raises, called “delayed retirement credits,” can boost your benefits by as much as 124% of your PIA if you have an FRA of 67 and you wait until age 70 to collect. Maximizing your Social Security benefits can help close a gap between the money youve saved and the income you want in retirement.
Percent of PIA collectable by Age3
Collect at Age 67
Collect at Age 70 or Later
*Assumes FRA of 67
You Need To Pay Down Debt
There are some debts you need to tackle before you retire. If you have high-interest debt, claiming Social Security early can help you pay the debt down. Depending on the interest rate youre paying, the 8% yearly boost to your benefits that you receive for each year you wait past full retirement age might not be worth the increased monthly benefit. Using the early benefits to reduce or eliminate your debt earlier could mean youll be able to keep more of your benefits in the future.
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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 youâre earning more now than ever before, your best bet is to keep working, if thatâs possible, and delay receiving benefits until age 70. Youâll 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, youâll receive your entire benefit.
Note that any money Social Security withholds from your benefit isnât 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, doesnât count.
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How Social Security Works
Social Security is meant to supplement your retirement income and ease financial concerns as you get older. Its essentially a support system for Americas elderly, enabled by the 1935 Social Security Act. Most beneficiaries are retirees and their families. However, disabled individuals and survivors of workers who have died are also eligible to collect Social Security benefits.
Workers make Social Security contributions each month, which appear on your paycheck as Federal Insurance Contributions Act taxes. Upon retirement, you can begin to receive Social Security payments, which will continue throughout the rest of your life. How much you receive each month, however, depends on when you elect to begin taking benefits and whether youve reached full retirement age at that point.
Full retirement age is the age at which you become eligible to start receiving full retirement benefits. It was 65 for many years, but the Social Security Administration amended that rule in 1983 because of increases in average life expectancy. Now, depending on the year you were born, you reach full retirement age sometime between 65 and 67. Full retirement age rises gradually from 1938 onward. Anyone born after 1960 reaches full retirement at 67. The Social Security Administration table below breaks down full retirement benefits for different age groups:
|Social Security Administration Retirement Benefits|
|65+2 months for every year after 1937|
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.
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What Is My Retirement Age
Americans can choose to start collecting Social Security benefits between the ages of 62 and 70. Many people want to start as soon as possible, which is understandable. After all, youve spent your career paying into Social Security, and it makes sense to take advantage of those benefits. However, just because you can start collecting at age 62 doesnt always mean its the best choice. This is because, for some people, 62 is not actually considered your full retirement age. If you were born after 1960, your full retirement age is 67. If you were born in the 1950s, your retirement age is around 66. These numbers have been adjusted over time in an effort to compensate for an increase in average life expectancy.
You need to wait until you reach your full retirement age to apply for social security if you want to receive your full benefits. However, if you wait past your full retirement age, youll generally receive a Delayed Retirement Credit that can slightly increase the amount of benefits you receive. The longer you wait after your full retirement ageup until you reach age 70the higher your benefit will likely become. You can find more detailed information on Delayed Retirement Credits on the Social Security Administrations website.
Can A Divorced Woman Who Was Married For More Than 10 Years Claim A Spousal Benefit On Her Ex
Not any longer. The government eliminated a strategy that allowed a spouse or a divorced spouse to use a restricted application to file for a spousal benefit while letting her own retirement benefit grow. Now only people born before 1954 can do this.
Instead, when a spouse or divorced spouse files for benefits, the government will give her all the benefits she is eligible for whether it is her retirement benefit or a spousal benefit, said William Reichenstein, a principal of Social Security Solutions, a company that helps individuals maximize their lifetime income.
A divorced spouse can file for a spousal benefit even if the ex-spouse has not yet claimed a benefit as long as both are at least 62 and are divorced for more than two years. A married spouse must wait until her spouse has filed.
But if the ex-spouse dies, the picture changes. The surviving ex-spouse can claim a survivor benefit as early as 60 and allow her retirement benefit to grow until as late as 70. Or she can claim her reduced retirement benefit early and then switch to a higher survivor benefit at full retirement age.
If you were married for 10 years, keep tabs on the ex, Ms. Floyd said. Once he dies, that survivor benefit could be higher than your own.
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How The Numbers Work
A study conducted by Stanford University has identified a few conditions that conclude delaying to collect is the best when:
- Interest Rates Are Low
- Single Women v Single Men
- Multiple Earning Couples
Currently interest rates are still at all time lows. The reason why this makes it more beneficial to delay is because you will not be able to gain much, if any, from saving your collection yourself. If interest rates were high it would be assumed that you could invest your collections and that interest would outnumber the benefits of waiting. Married couples have the ability to collect ones earnings early to live off of and delay the others. This helps if income is needed currently to help with living expenses. Lastly, the benefit of being a single woman and delaying to collect is strictly based of the statistics that women have the tendency to outlive men.
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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Taxes On Your Benefits
Your Social Security benefits may be partially taxable if your combined income exceeds certain thresholds. Regardless of how much you make, the first 15% of your benefits are not taxed.
The SSA defines combined income using this formula:
- Your adjusted gross income + nontaxable interest + half of your Social Security benefits = your combined income
If you file your federal tax return as an individual and your combined income is $25,000 to $34,000, then you may have to pay income tax on up to 50% of your benefits. If your combined income is more than $34,000, you may have to pay tax on up to 85% of your benefits.
If youre married, filing a joint return, and your combined income is $32,000 to $44,000, then you may have to pay income tax on up to 50% of your benefits. If your combined income is more than $44,000, you may have to pay tax on up to 85% of your benefits.
Financial Benefits Of Working Longer
Many people want to retire as soon as it is financially feasible to do so, but itâs 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 thereâs even more to the story. As you approach retirement, youâre 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 âcatch-upâ 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.
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How Soon Can I Take Social Security
When it comes to receiving the maximum Social Security benefit possible, timing is important. Sometimes beneficiaries may receive more by delaying withdrawal, but some older adults may need the funds sooner.
Start by asking yourself some questions:
- Do I want to retire early?
- Do I want to/need to work past age 70?
- What happens to my Medicare if I work past age 65?
The SSA website offers future planning calculators, opens new window to help you estimate things that can affect retirement. These include life expectancy, pension eligibility, spousal benefits and retirement age.2
While you can take benefits as early as age 62, it may not be recommended. Only those on disability, or surviving spouses, can take Social Security earlier than 62.3
Your full retirement age, also known as normal retirement age, determines if you can receive full benefits. While the original full retirement age was 65 for all, heres a snapshot of how the law has changed:
If you take Social Security up to 36 months before your full retirement age, your benefit will be permanently reduced by 5/9 of 1%. If you withdraw more than 36 months early, your benefit is reduced by 5/12 of 1% each month.4