Questions Regarding Social Security
If you have questions regarding Social Security, you may want to visit the Social Security Administration’s website at www.socialsecurity.gov to find your answers. If you prefer to speak to someone directly, the SSA is available to speak with callers Monday thru Friday from 7:00 a.m. to 7:00p.m. The toll-free number is 800-772-1213.
What Is The Future Of Social Security
If you’re skeptical about the future of Social Security or wary of potential changes such as means testingwhich could reduce or eliminate benefits for the wealthy, or an increase in the full retirement ageyou may be tempted to start benefits early, under the assumption that it’s better to have something than nothing. The 2021 annual report from the Social Security Trustees, released in August 2021, projects that the Social Security Trust Fund has enough resources to cover all promised benefits until 2034. Then, absent a change from Congress, the trustees project that benefits would need to be cut for all current and future beneficiaries to about 78% of scheduled benefits. The 2021 report includes the trustee’s best estimates of the impact from the pandemic, which were not reported on last year.
Over the longer term, changes such as later benefit dates or means testing may be considered.
In any situation, if you’re particularly concerned about the future prospects for Social Security, that’s a good reason to save more, and earlier, for your retirement.
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.
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.
When Is The Best Time To File For Social Security Benefits
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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.
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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 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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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.
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
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Earn Ssa Work Credits In Some Countries
You may not have enough credits from your work in the United States to qualify for retirement benefits. But, you may be able to count your work credits from another country. The SSA has agreements with 24 countries. If you earned credits in one of those countries, they can help you qualify for U.S. benefits.
Theres A Social Security Spousal Benefit
Marriage brings couples an advantage when it comes to Social Security. One spouse can take what’s called a spousal benefit, worth up to 50% of the other spouse’s Social Security benefit. For example, if your monthly Social Security benefit is worth $2,000 but your spouse’s own benefit is only worth $500, your spouse can collect a spousal benefit worth $1,000 — bringing in $500 more in income per month.
Just as the benefit based on your own work history is reduced if you claim it early, the same is true for a spousal benefit. That 50% figure is the maximum amount that only a spouse who is at least full retirement age is eligible for. Taking the spousal benefit early at, say, age 62, reduces the amount to as little as 32.5% of the higher earners benefit. If you take your own benefit early and then later switch to a spousal benefit, your spousal benefit will still be reduced.
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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.
When Is Your Fra
Your Social Security checks will be permanently reduced if you file before your FRA, but they will be permanently increased if you file after it. So it’s important to know what exactly your FRA is.
If Your Birth Year Is…
Your FRA Is…
Table source: Social Security Administration.
Note that for anyone born on the first of any month, FRA is determined as if your birthday was in the prior month. This means if you were born on January 1 of any year, FRA is determined as though you were born the prior year.
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Should I Take Social Security Early
Some argue a retiree should take his or her benefits as early as possible. Cash in hand is always better than a promise – “A bird in the hand” as they say. This of course means that while Social Security benefits can begin being withdrawn at age 62, the figure paid is much lower at this age than withdrawing it later on. However, the same recipient can also then use the funds, reinvestment and make them grow elsewhere.
On the other hand, if a person waits, the maximization of benefits waiting until age 70 or so can be a big difference in the actual monthly payment received by thousands of dollars. For example, for those born after 1960, the difference between taking benefits at age 62 versus 67 is about 30 percent, or $300 out of every $1,000 possible.1
For those who want to retire earlier, it means both waiting for eligibility to withdraw as well as making sure one has a plan of support until that age is reached. That means having enough savings to cover the gap, and that cost can be substantial as well. Prior to recording 35 years of work per Social Security, a person wont realize a full benefit payment schedule.2 The figure may actually be even lower if any of the years were not full-time employment.
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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.
In 2022, the average monthly premium for Part D will be $33 per month versus $31.47 in 2021. If you enroll in a Medicare Advantage plan, the average monthly premium will be $19 per month in 2022 versus $21.22 in 2021. However, if you are still receiving health insurance from your or your spouses employer, you might not yet have to enroll in Medicare.
As of Oct. 16, 2021, Social Security offices 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.
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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.
If You Work While Getting Social Security
Yes, you can work full or part-time while also getting Social Security retirement benefits. However, if you have not yet reached your full retirement age, and if your net income from working is higher than the annual earnings limit, your annual benefits will be reduced. Beginning in the month you reach full retirement age, Social Security will stop reducing your benefits no matter how much you earn.
During any full calendar year in which you are under full retirement age, Social Security deducts $1 from your benefit payments for every $2 you earn above the annual net income limit. The income limit changes every year. In 2017, the income limit was $16,920.
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An Advanced Claiming Strategy
If you or your spouse reached age 62 by the end of 2015, you qualify for a Social Security claiming strategy called restricted application.
Here’s how it works: The younger spouse claims Social Security benefits based on his or her own earnings record.
When the older spouse reaches full retirement age , he or she files a restricted application for spousal benefits only. At that point, both spouses are claiming benefits based on the younger spouse’s earnings record.
Then, at age 70, the older spouse claims benefits based on his or her own earnings record, which have increased to 132% of what that spouse would’ve been eligible for at FRA.
See how it works:Restricted application
Doing A Breakeven Analysis And Other Ways To Decide How Soon To Start
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If youre about to retire, you may be wondering whether you should start claiming your hard-earned Social Security benefits now. Here are a few key factors to consider in making that decision.
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Benefits May Be Taxable
You will have to pay taxes on your benefits if you file a federal tax return as an individual and your total income is more than $25,000. If you file a joint return and you and your spouse make more than $32,000 jointly, you will have to pay taxes on your benefits. For more information, call the InternalRevenue Service at 800-829-3676.