How Your Social Security Benefits Are Earned
To be eligible for Social Security benefits in retirement, you must earn at least 40 “credits” throughout your career. You can earn as many as four credits each year, so it takes 10 years of work to qualify for Social Security.
In 2021, you must earn $1,470 to get one Social Security work credit and $5,880 to get the maximum four credits for the year.
Your May Have To Pay Taxes On Social Security Benefits
Most people know that you pay tax into the Social Security Trust Fund throughout your career, but some retirees don’t realize that you also have to pay tax on your Social Security benefits once you start taking them. Benefits lost their tax-free status in 1984, and the income thresholds for triggering tax on benefits haven’t been increased since then.
It doesn’t take a lot of income for your Social Security benefits to be taxed. For example, a married couple with a combined income of more than $32,000 may have to pay income tax on up to 50% of their Social Security benefits. Higher earners may have to pay income tax on up to 85% of their benefits.
You may also have to pay state income taxes on your Social Security benefits. See our list of the 12 States That Tax Social Security Benefits.
Retirement Or Spouses Benefits
You need to be at least 61 years old and 9 months in order to claim these benefits. Another added requirement you also need to want your benefits to start in no more than four months. Applying for retirement benefits is essentially changing your financial status with the IRS and the SSA, which can have monetary ramifications if you change your mind or make changes outside of the allowable timeframes. Make sure to use the online tools to properly align your benefits with your goals. The online application for retirement and spouses benefits can be found here.
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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.
You’re In Poor Health And Fear You Won’t Be Around To Collect Later
If, unfortunately, you don’t expect to live long enough to profit from delaying your benefits, your wisest course may be to take them sooner rather than later. Even if you were to receive a much bigger benefit by claiming at age 70, for example, you could be well into your 80s by the time you’d come out ahead in terms of the total benefits you’ve received. Financial planners refer to this as your breakeven age.
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How Social Security Approval Works
When you retire, a lot of questions cross your mind. The first question you should ask is when to claim social security benefits. See our article on When to Claim Social Security Benefits.
The next question after you decide to claim is: how long does it take to get my first social security check? It would be prudent to start by knowing how long it takes to apply for social security online. To your relief, the process will not take a lot of your time. Once your application is done and submitted, you will be wondering how long it takes to get social security approval.
Typically, it takes 6 weeks to process your application and for the benefits to start. However, it will take longer if you submit incorrect information. Also, the duration for approval will depend on the number of submissions the Social Security Administration will be processing at the time. Overall, the wait time is at least six weeks or longer depending on a number of factors.
You will need your social security number, birth certificate, and supporting financial documents when you apply. Tax return evidence and W-2 forms are also required for self-employed applicants.
For those not born in the USA, you should provide proof of citizenship. A certificate of citizenship or passport will be adequate. Also, marital information will be required.
Luckily, all these documents are not required at once when you apply. The SSA will send you notifications when they are required.
What Is The Future Of Social Security
Social Security is expected to run out of cash reserves in 2034, according to the Old-Age and Survivors Insurance Trust Fund, the retirement benefits account managed by the Social Security Administration.
However, this doesnt mean the program would be bankrupt and unable to pay out benefits. If Congress does nothing to reform the system by 2034, Social Security would still be able to pay 79 percent of promised benefits until 2090.
Social Security has run out of cash reserves before. Congress reformed the program in the 1980s by taxing benefits based on income levels and by gradually increasing the full retirement age from 65 to 67.
What About Taxes On Social Security
Keep in mind that Social Security benefits may be taxable, depending on your combined income. Your combined income is equal to your adjusted gross income , plus non-taxable interest payments , plus half of your Social Security benefit.
As your combined income increases above a certain threshold , more of your benefit is subject to income tax, up to a maximum of 85%. For help, talk with a CPA or tax professional.
In any case, if you’re still working, you may want to postpone Social Security either until you reach your full retirement age or until your earned income is less than the annual limit. In no situation should you postpone benefits past age 70.
How Do You Apply For Social Security Benefits
If you are eligible for Social Security benefits, you can apply online, by phone or by appointment at a local Social Security office.
How to Apply for Social Security Benefits
- Applying online is the easiest way to apply for Social Security benefits. The Social Security website allows you to apply for retirement, spouses, Medicare and disability benefits at the same site. You can also apply for Supplemental Security Income benefits.
- If you dont have Internet access, you can sign up by phone. You can call the Social Security Administration at 1-800-772-1213 .
- The Social Security Administration has restrictions on office visits during the COVID-19 pandemic. It does allow in-person visits for certain services. You should check with the SSAs Coronavirus page to see if you can make an in-person appointment at your local office.
What Month Should I Say That I Want To Start Benefits If I Want To Get My First Payment In January
I am 64, turning 65 in March 2022. My FRA is 66.5. I am retiring Dec 31, 2021, and want to receive my first SS payment in Jan 2022. I have two questions: 1. when I apply for SS, what month should I indicate that I want to start receiving my payments? 2. If I get my first payment in Jan 2022, and because SS is paid 1 month in arrears, when I file my income taxes for 2021, will the Jan 2022 month’s payment be considered as earned in income in 2021 and be included in my 2021 income? Or is it considered as 2022 income since it was paid in 2022? Thank you.
Hi. As you state, Social Security pays benefits a month behind. So, In order for you to receive a payment in January 2022 you’d need to a) claim your benefits effective with the month of December 2021, AND b) you’d need to be eligible to be paid for December. The only way that you’d be eligible to be paid for December 2021 is if you either a) earn less than $18,960 in the calendar year of 2021, or b) you earn $1,580 or less in December 2021 . Therefore, if you’re planning to work through December, your earnings may prevent you from being able to be paid in January unless your earnings are below the above mentioned limits.
How Much Can You Expect To Get
Your Social Security retirement benefit payment is based on how much you made during your working years. The more you earned, the more you’ll get when you retire.
Your Social Security retirement benefit payment is also affected by the age at which you decide to retire. You can retire as early as age 62, but if you retire before your full retirement age, your benefits will be permanently reduced, based on your age. For example, if you retire at age 62, your benefit would be about 25 percent lower than what it would be if you waited until you reach full retirement age.
You also need to remember that monthly premiums for Medicare Part B are usually deducted from monthly Social Security benefits. Retirement is a great time to look into the pros and cons of a private Medicare Advantage plan.
Retirement benefits are based on the recipients lifetime earnings in work in which they paid Social Security taxes. Higher income translates to a bigger benefit, up to a point. The amount to which retirees are entitled is modified by other factors, most crucially the age at which they first claim benefits.
For reference, the estimated average Social Security retirement benefit in 2021 is $1,543 a month. The maximum benefitthe most an individual retiree can getis $3,148 a month for someone who files for Social Security in 2021 at their full retirement age.
Plan First Withdraw Later
Healthcare coverage can be a major retirement expense, and Medicare is not all-inclusive. Before you choose to take Social Security, make sure you’ve reviewed your budget, being careful to factor in healthcare costs, inflation and unexpected events.
Don’t underestimate those expenses. A fixed income may not allow for much fluctuation. Also people are living longer, so retirement may be longer than you plan for. According to the SSA, more than 1 in 3 of today’s 65-year-olds will live to age 90. More than 1 in 7 will live to age 95.7
The decision of when to take Social Security is important and personal. It will likely factor in to how you meet current and future healthcare needs.
Plan before you make your next move, and be better prepared for what lies ahead. For added peace of mind, consult a financial advisor before making any major decisions about your Social Security and retirement date.
This material is provided for informational use only and should not be construed as medical advice or used in place of consulting a licensed medical professional. You should consult your doctor to determine what is right for you.
Humana is a Medicare Advantage HMO, PPO and PFFS organization and a stand-alone prescription drug plan with a Medicare contract. Humana is also a Coordinated Care plan with a Medicare contract and a contract with the state Medicaid program. Enrollment in any Humana plan depends on contract renewal.
Perceived Disparate Treatment Under Social Security And Immigration Law
Some believe there is a disconnect between how the Social Security and immigration rules treat unauthorized aliens. Immigration policies are designed to discourage and penalize foreign nationals who work without authorization in the United States. In contrast, under the Social Security program, there are certain circumstances when a foreign national who worked in the United States without authorization can collect Social Security benefits based on taxes paid while the foreign national was working illegally. As a result of this perceived inconsistency, some oppose paying Social Security benefits to unauthorized aliens and others who worked without authorization, arguing that foreign nationals who violate immigration law should not be rewarded by receiving Social Security benefits. Others contend that foreign nationals who work in Social Security-covered employment should be eligible for benefits whether or not they had employment authorization, because they “paid into the system.” The following section presents an example of this tension.
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
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.
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When Should I Apply For My Benefits
Today is April 5, 2021. I’ll be 70 years old in August 2021. If I apply this month, when will I receive my first check? Should I wait another couple of months? When should I apply for my Social Security benefits?
Hi. If you apply now you could choose to start your benefits effective with any month from October 2000 to August 2021. If you were born on any day from August 2nd 1951 through September 1st 1951, you’d want to choose August 2021 as the month to start your Social Security retirement benefits assuming that you want to receive your maximum age 70 rate. Social Security pays benefits a month behind, though, so if you choose to start your benefits effective with August your first payment would be scheduled for payment in September.
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Working While Collecting Social Security Retirement
Many people choose or need, to keep working after claiming Social Security retirement benefits. However, if you continue work after claiming early retirement benefits your Social Security benefits may be reduced until you reach your full retirement age.
If you retire at age 62, Social Security will deduct money from your retirement check if you exceed a certain amount of earned income for the calendar year. For example, the income limit in 2018 was $17,040 or $1,420 per month. The income limit increases annually. Until you reach your full retirement age, Security will reduce your benefit by $1 for every $2 you earn over the income limit. Once you reach your full retirement age, you will receive your full Social Security retirement benefit with no limitation on how much income you earn from working.
The worse news is that Social Security does not apply the early retirement work penalty by simply deducting a small amount from each monthly benefit check. Instead, the agency may withhold several months entire checks until the total reduction is paid off. This means your annual budget will have to account for a certain number of months without a benefit check. Complete details on this decidedly complicated process can be found in Social Securitys pamphlet on How Work Affects Your Benefits. You can also use Social Securitys earnings test calculator to see how much your reduction will be and when your checks will be withheld.
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Applying For Social Security
- Generally, you should apply for Social Security retirement benefits three months before you want your benefits to begin. Even if you dont plan to receive benefits right away, you should still sign up for Medicare three months before you reach age 65.
- If you were born before 1938 and you meet all other requirements, you can receive benefits beginning with the first full month you are age 62. However, if you choose to begin receiving benefits before age 65, your benefits will be reduced to account for the longer period over which you will be paid.
- The full retirement age is 65 for persons born before 1938. The age gradually rises until it reaches 67 for persons born in 1960 or later. Social Security benefits are payable at full retirement age for anyone with enough Social Security credits. As you work and pay taxes, you earn credits that count towards eligibility for future Social Security benefits. You can earn a maximum of four credits each year. Most people need 40 credits to qualify for benefits. People who delay retirement beyond full retirement age get special credit for each month they dont receive a benefit until they reach age 70.
- To find out what your retirement age is, use the Social Security Retirement Age Chart at www.ssa.gov
- You should speak with a Social Security representative in the year before you plan to retire. It may be to your advantage to start receiving your retirement benefits before you actually stop working.
ave questions? Call at 874-4618.