Sunday, August 14, 2022

When Must You Take Social Security

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Early Benefits Can Still Pay Off

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However, taking early benefits can still pay off despite the reduced monthly check. But youll want to be sure you budget for a reduced benefit.

No one can predict how long youll live, but if youre facing a potentially significant reduction in life expectancy and are short of income, taking Social Security early may be appropriate, says Neiser.

Married women are also good candidates for claiming early benefits because they are likely to outlive their husbands. Those widows then become eligible to receive the greater of either their benefit or their late husbands benefit.

However, this scenario works only if the husband does not claim his benefits early. By not claiming early benefits, the husband effectively increases the monthly benefit his wife eventually receives. So youll want to calculate how filing early will affect your spousal benefit here.

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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    The Bottom Line On When To Claim Your Social Security

    Every individuals and couples needs are different when it comes to claiming Social Security. But maybe waiting until age 70 is something we should seriously consider.

    Even if youve already filed, you may find that youre eligible for a do-over. You can withdraw your application for up to 12 months after you file, and reapply later. But you only get one do-over. If it makes sense for you to do this, youll have to pay back the Social Security benefits that you received, and in many cases your IRA or 401 may be where you have to get that money.

    If you arent sure which Social Security claiming strategy is the best fit for your needs and goals, talk to a financial adviser who is knowledgeable about retirement income planning and, specifically, Social Security benefits. An experienced professional can lay out all your options and help you work out a timeline.;

    Kim Franke-Folstad contributed to this article.

    710863-9/20

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    Eligibility Criteria For Unemployment Benefits

    If youâve lost your job for a reason that wasnât your fault, the foundational criteria for receiving unemployment benefits are fairly straightforward, although specific eligibility criteria does vary from state to state. Without question, you have to be willing and able to work and be actively seeking a job. If you are working a part-time job while seeking full-time employment, you can still usually get at least a partial weekly benefit. The number of hours that you work and the wage that you earn will determine how much in unemployment benefits you qualify for.

    Your work history also plays a major role in determining how much you will get each week and how many weeks youâll receive benefits. Applicants who have worked for many years at a high-paying job will likely qualify for more benefits than an applicant with a year of full-time work history.

    Recent legislation has also extended unemployment benefits to independent contractors, self-employed workers, and gig workers. This legislation has increased the pool of eligible candidates by several million claimants. There are some cases, in fact, whereby an applicant who would not have qualified for unemployment benefits before could now be eligible for benefits under the rules of the new legislation.

    How Should I Decide When To Take Benefits

    10 Things You Must Know About Social Security

    Consider the following factors as you decide when to take Social Security.

    Your cash needs: If youre contemplating early retirement and you have sufficient resources , you can be flexible about when to take Social Security benefits.;;

    If youll need your Social Security benefits to make ends meet, you may have fewer options. If possible, you may want to consider postponing retirement or work part-time until you reach your full retirement ageor even longer so that you can maximize your benefits.

    Your life expectancy and break-even age: Taking Social Security early reduces your benefits, but youll also receive monthly checks for a longer period of time. On the other hand, taking Social Security later results in fewer checks during your lifetime, but the credit for waiting means each check will be larger.

    At what age will you break even and begin to come out ahead if you delay Social Security? The break-even age depends on the amount of your benefits and the assumptions you use to account for taxes and the opportunity cost of waiting . The SSA has several handy calculators you can use to estimate your own benefits.

    If you think youll beat the average life expectancy, then waiting for a larger monthly check might be a good deal. On the other hand, if youre in poor health or have reason to believe you wont beat the average life expectancy, you might decide to take what you can while you can.

    A quick note about life expectancy;

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    When Do I Stop Paying Social Security Tax

        Of all the taxes that come out of your paycheck, none may be as inescapable as those that go to Social Security. Whether you’re salaried or self-employed, you must generally contribute throughout your entire working life. There are, however, a few exceptions, which we’ll cover here.

        In A Rush To File For Social Security Benefits At Age 62 Many People Are But Slow Down And Do The Math First Or You Might Regret It

        When it comes to claiming Social Security retirement benefits, you may want to consider waiting to start benefits when youre 70.

        That means not starting benefits when youre 62 , nor even full retirement age .

        I know that starting benefits at age 70 might be a tough thing to reconcile with but it doesnt mean that you have to work until youre 70.

        Here are three reasons why delaying taking your Social Security benefit to age 70 is a decision you may want to consider:

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        Whats Full Retirement Age

        Full retirement age is when youre eligible to receive full Social Security benefits. Your full retirement age depends on your birth year: Under current law, if you were born in 1951 or later, your full retirement age is now some point after age 65all the way up to age 67 for those born after 1959. If you were born before 1951, youve already reached age 66 and full retirement age.

        Retirement ages for full Social Security benefits;

        If you were born in

        Your full retirement age is

        1950 or earlier

        But Wait What Social Security Benefit Can I Claim And When

        When should you take Social Security?

        Smiling retired couple looking at adorable dog while resting in park

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        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.

        Childrens Benefits:

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        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.

        How To Apply For Both Programs

        If you are eligible to receive both unemployment compensation and Social Security, then you will need to apply separately for each benefit in the same manner as you would if you were only applying for one of them.

        Unemployment insurance is administered at the state level and each state has different rules and processes. The Department of Labor provides contact information and websites for all state unemployment insurance agencies. You should refer to your state’s website for the most up-to-date information about how to apply for unemployment benefits.

        Social Security, on the other hand, is a federally funded program operated by the U.S. Social Security Administration. The fastest way to complete your application for Social Security benefits is to do so online.

        Keep in mind that you donât have to wait to begin receiving one benefit before filing for the other. You can file for both benefits at the same time. Also, remember that because each benefit is provided by a different agency, the time frame for receiving payments after you file will vary.

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        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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        Social Security Disability

        You’ll often hear that scoring the highest possible monthly Social Security benefit is the right thing for your retirement. And to do that, you’ll need to delay your filing until the age of 70.

        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.

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        Eligibility Criteria For Social Security Benefits

        If you wish to apply for Social Security benefits, youâll have to meet certain conditions. First, in order to get any kind of monthly benefit, you must have worked for at least 40 full quarters before you retire. A quarter is a three-month period during which you must have earned at least $1,470 . Once you have worked 10 years of qualifying quarters, you are eligible to apply for Social Security.

        Second, you must have reached retirement age. This threshold varies depending on the year you were born. If you wait until you reach your full retirement age before collecting your Social Security benefit, youâll qualify for the full amount of the benefit. If you wish to collect your benefit early, you can apply once you turn 62, but your Social Security benefit will be reduced by 25% for the rest of your life. If you delay collecting your Social Security payments, however, delayed retirement credits could increase the benefit that youâll receive once you do start collecting.

        Going Back To Work Can Affect Social Security Benefits

        If you are able to find another job and start working again after filing early for Social Security benefits, your earnings have the potential to reduce your Social Security retirement benefits until you reach full retirement age. If you earn over a certain amount each year, your retirement benefits will be reduced according to a formula found on the Social Security website. Check the website to find out exactly how much you can earn without this happening and how much your benefits will be reduced if you earn more than this amount each year. Once you have reached full retirement age, there is no earnings limit that will lead to a reduction in your benefits.

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        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

        Theres An Annual Social Security Cost

        Social Security Benefits: Is Waiting Just Plain Wrong?

        One of the most attractive features of Social Security benefits is that every year the government adjusts the benefit for inflation. Known as a cost-of-living adjustment, or COLA, this inflation protection can help you keep up with rising living expenses during retirement. The Social Security COLA is quite valuable; its the equivalent of buying inflation protection on a private annuity, which can cost a pretty penny.

        Because the COLA is calculated based on changes in a federal consumer price index, the size of the COLA depends largely on broad inflation levels determined by the government. In 2021, Social Security beneficiaries will see a 1.3% COLA in their monthly Social Security benefits.;

        The Kiplinger Letter forecast in March that the 2022 COLA would be 3%, which would be the largest increase since 2012 when Social Security benefits ticked up 3.6%.;;

        Heres what COLAs have been in other recent years:

        • 2009: 5.8%
        • 2021: 1.3%

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        What To Consider Before Filing For Social Security

        A larger benefit check sounds great, but there are tradeoffs, and soon-to-retire folks should consider multiple issues before they decide one way or the other on when to file. If you really want to consider all the avenues, then youll have to think about your finances and longevity two issues that people have a hard time grappling with.

        But heres the key tradeoff: you can file early and take a reduced benefit, expecting that a shorter lifespan will mean you receive more now, or you could file at full retirement age or later and claim a bigger check, and eventually live long enough to claim more than the first approach.

        Social Security is like longevity insurance, says Brent Neiser, a certified financial planner and former chair of the Consumer Advisory Board at the Consumer Financial Protection Bureau. Its a stream of payments that will not stop throughout your life, so delaying your benefits to keep those payments as large as possible forms a helpful base to your retirement plan.

        Neiser urges those who have not saved enough for retirement to use whatever means possible to postpone their Social Security benefits until after their full retirement age to help boost their future income.

        You can use personal savings to help bridge the gap, but ideally you should plan to work a little longer , Neiser says.

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