Tuesday, August 9, 2022

When Should I File For My Social Security

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No More File And Suspend

When should I file my Social Security Disability application?

Note that the claiming strategy called file and suspend, which allowed married couples who have reached their FRA to receive spousal benefits and delayed retirement credits at the same time, ended as of May 1, 2016. However, spouses born before Jan. 2, 1954, who have attained their FRA may still be able to file a restricted application. It allows them to claim spousal benefits while delaying their own benefits up to age 70.

Social Security benefits can be taxable if your combined income is high enough.

When Does A Senior Citizen On Social Security Stop Filing Taxes

OVERVIEW

The IRS typically requires you to file a tax return when your gross income exceeds the standard deduction for your filing status. These filing rules still apply to senior citizens who are living on Social Security benefits. If Social Security is your sole source of income, then you don’t need to file a tax return.

Spouses Who Dont Qualify For Their Own Social Security

Spouses who didnt work at a paid job or didnt earn enough credits to qualify for Social Security on their own are eligible to receive benefits starting at age 62 based on their spouses record. As with claiming benefits on your own record, your spousal benefit will be reduced if you take it before reaching your FRA. The highest spousal benefit that you can receive is half of the benefit that your spouse is entitled to at their FRA.

While spouses get a lower benefit if they claim before reaching their own FRA, they will not get a larger spousal benefit by waiting to claim after their FRAsay, at age 70. However, a nonworking or lower-earning spouse may get a larger spousal benefit if the working spouse has some late-career, high-earning years that boost their benefits.

Also Check: At What Age Can I Claim Social Security

How To Stop Social Security Check Payments

The SSA can not pay benefits for the month of a recipients death. That means if the person died in July, the check received in August must be returned. Find out how to return a check to the SSA.

If the payment is by direct deposit, notify the financial institution as soon as possible so it can return any payments received after death. For more about the requirement to return benefits for the month of a beneficiarys death, see the top of page 11 of this SSA publication.

Family members may be eligible for Social Security survivors benefits when a person getting benefits dies. Visit the SSA’s Survivors Benefits page to learn more.

Social Security Disability Programs

Im 62 and cannot do my job any longer. Should I Apply for Social ...

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

FEATURE
Up to 85%

Income Taxes for Other Benefit Programs

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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.

The Bleak Future Of Social Security

Aggravated by the COVID pandemic, the Social Security trust fund most Americans rely on for their retirement will run out of money in 12 years, one year sooner than expected, according to the annual Social Security 2021 Trustees Report published on August 31, 2021. The pandemic also threatens to shrink retirement payments and increase health-care costs for older Americans, according to the Trustees.

The Treasury Department oversees two Social Security funds: Old-Age and Survivors Insurance and Disability Insurance Trust Funds. These funds are intended to provide a source of income to former workers who have retired at the end of their careers or to those who cannot work due to a disability, respectively.

Social Security officials said that the Old-Age and Survivors trust fund is now able to pay scheduled benefits until 2033, one year earlier than reported last year. The Disability Insurance fund is estimated to be adequately funded through 2057, eight years earlier than in the report published in 2020.

In a press briefing, senior Biden administration officials said that a COVID-related spike in deaths among retirement-age Americans in 2020 helped keep the programs costs lower than projected. They also noted, however, that the long-term effects of the COVID pandemic on the Social Security trust funds is harder to project as costs and revenues return to their extended forecasts.

Also Check: Ssa Social Security

Why You Can Trust Bankrate

Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. Weve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.

Bankrate follows a strict editorial policy, so you can trust that were putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.

Our reporters and editors focus on the points consumers care about most how to save for retirement, understanding the types of accounts, how to choose investments and more so you can feel confident when planning for your future.

Documents You Will Need

How Do I Apply For My Social Security Retirement Benefits Online – Documents Needed To Apply For SSI

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.

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Factors That Affect Social Security Benefits

The math seems to say that everyone should wait until age 70 to reap the best benefits, but this isnt always the case. There are times when it might make sense to start collecting earlier. If, for example, you are in poor health or if the family breadwinner is ill and can no longer work, collecting before your full retirement age could help prevent debt from mounting up.

Your marital status also plays a factor. If youre single and in poor health, you could end up using your savings to pay for medical bills between the ages of 66 and 70. In this case, you might be better off collecting Social Security benefits at a lower rate than holding out for the higher payments youd receive at age 70.

If, however, youre single, in good health and either still working or have plenty of savings, consider waiting until age 70 in order to benefit from the higher payments.

With married couples, it could be best for the spouse who earns the most money to hold off until 70, while the spouse who makes less starts collecting at 62. This approach will ensure that when one of you passes away, the surviving spouse will receive the higher benefitsgenerally the amount their spouse would have received at age 70, even if the spouse died before that age.

For more help with retirement planning, consider contacting a Certified Financial Planner. They can help you ensure youre maximizing your Social Security benefits and answer any questions you have about your other assets.

What If I Change My Mind

If you receive Social Security benefits at a reduced rate, but then change your mind, you have the option of withdrawing your application and paying back to the government what you’ve already received . Then, you could restart benefits at a later date to take advantage of a higher payout. But you are limited to one withdrawal per lifetime.

For example, let’s say you elected to receive early benefits at age 62, but then decided to go back to work at age 63. You could withdraw your Social Security application within the first 12 months of receiving benefits, pay back the years’ worth of benefits you received, go back to work, and then wait until a later age to restart your benefit checks at a higher level.

For important details about repaying benefits please read the SSA publication If You Change Your Mind.

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You Have Minor Or Disabled Children At Home

If you have children, eligible grandchildren, or even a spouse providing care for these children at home, these family members may be eligible for a benefit. Just know you will have to file first before they can receive it!

Theres a rule that states that before benefits can be paid to anyone off of your work record, you have to be receiving benefits. That means filing early could make more sense than waiting.

When combined with your benefits, the benefits to children and your eligible spouse can be up to 180% of your full retirement age benefit. If you have children at home that meet the criteria for eligibility, thats an obvious reason to consider filing early.

Lets look at an example to illustrate this.

Say youre 62 and your wife is 50. You have two children, ages 13 and 11. Thanks to good savings habits throughout your working career, you dont need Social Security income and can be flexible when you file.

It might seem like it makes sense to wait to file until full retirement age, then, when youd receive $2,000 .

If you lived until 90, youd receive an additional $70,000 in benefits for delaying filing until 66 instead of filing at 62. But this doesnt take into account the benefits paid to your children.

Thats the quick rundown of the five scenarios in which I think it makes sense to file for Social Security as early as possible.

So what does that mean for you as far as next steps?

If you need help getting started, there are two ways to get help.

Tax Considerations For Social Security Benefits

How should my clients file for Social Security?

How do these tax considerations affect when you should apply for Social Security benefits? At todays , they may not have much of an impact on most people. Still, tax rates and income thresholds can change, so its worth remembering that you will lose less of your Social Security to taxes if you are in a lower marginal tax bracket when you begin to collect.

You should also note that if you decide to return to work, even part-time, and arent yet at your FRA, your Social Security benefits may be temporarily reduced. The reduction is $1 for every $2 of earned income over $18,960 in 2021 . During the year when you reach your FRA, your benefits will be reduced by $1 for every $3 in income over $50,520 in 2021 until the month when you become fully eligible. That money isnt lost, however. The SSA will credit it to your record when you reach your FRA, resulting in a higher benefit.

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Tax Credit For Seniors

Even if you must file a tax return, there are ways you can reduce the amount of tax you have to pay on your taxable income. As long as you are at least 65 years old and your income from sources other than Social Security is not high, then the tax credit for the elderly or disabled can reduce your tax bill on a dollar-for-dollar basis.

Remember, with TurboTax, we’ll ask you simple questions about your life and help you fill out all the right tax forms. With TurboTax you can be confident your taxes are done right, from simple to complex tax returns, no matter what your situation.

Theres An Annual Social Security Cost

One of the best features of Social Security benefits is that the government adjusts the benefits each year based on inflation. This is called a cost-of-living adjustment, or COLA, and helps your payments keep up with increasing living expenses. The Social Security COLA is quite valuable its the equivalent of buying inflation protection on a private annuity, which can get expensive.

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 saw a 1.3% COLA in their monthly Social Security benefits.

The Kiplinger Letter predicted in September that the COLA for 2022 could be 6%, which would be the largest adjustment since 1982. The final COLA for 2022 will be announced on Oct. 13.

Heres what COLAs have been in other recent years:

  • 2009: 5.8%
  • 2021: 1.3%

Read Also: How To Find Out How Much Social Security I Will Get When I Retire

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.

Taking Social Security At 62

Download Your “Social Security Statement” Prior to Filing for Disability

Unless you meet a few clear-cut criteria, you’ll want to give the idea of taking Social Security at age 62 quite a bit of thought before you apply for benefits. Unless you have a critical illness, you’ll likely receive more income over your lifetime by starting your benefits later.

For example, let’s say that you live to age 84. You can get varying amounts, depending on whether you start Social Security at age 62, 66, or 70. To do the math, multiply your monthly benefit amount times 12 months, then multiply that by the number of years you expect to receive benefits.

  • Age 62: $835 × 12 × 22 = $220,440
  • Age 66: $1,114 × 12 × 18 = $240,624
  • Age 70: $1,470 × 12 × 14 = $246,960

You get more total income by waiting until age 70 to begin benefits. If you live longer, the age 70 plan works even better for you than the examples above.

For instance, if you start your benefits at 70 and live to age 94, you’ll receive $423,360 from Social Security. If you’d started at 62, you’d only get $320,640.

In general, the longer your life expectancy, the longer you should wait to start drawing Social Security.

Below are a few general guidelines you can use to determine whether it makes sense to take Social Security retirement benefits at age 62.

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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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