Claim Spousal Benefits And Delay Yours
If you and your spouse were born before Jan. 2, 1954, and have both reached full retirement age, you can claim spousal benefits and let your own benefits keep growing. Then, when you reach age 70, you can switch to your higher benefit.
One caution: You can’t have claimed your own benefit if you want to make use of this “restricted application,” as it’s called.
In order to claim a spousal benefit, your spouse must have filed for their own Social Security benefits .
At Her Full Retirement Age
Sheâs eligible for a portion of your benefit prior to her full retirement age. According to SSA.gov, if the spouse begins receiving benefits before their ânormal retirement ageâ the spouse will receive a reduced benefit. However, if your spouse is caring for a qualifying child, the spousal benefit is not reduced.
Why Should I Wait
You can take your Social Security benefits early or when you reach retirement age. You can also delay benefits.5 Whether you’re still working or have budgeted enough to live without Social Security benefits, you may be on the plus side when it comes to your monthly payout.
If your full retirement age is 66 or older, check out this chart, opens new window to see how delaying retirementeven just by several monthscould affect your Social Security benefits to your advantage.
You can also use this retirement benefits planner, opens new window to determine the best time to access your Social Security benefits.
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Claim Later For A Higher Benefit
For context, here’s a quick review of how timing affects your Social Security income. If you claim Social Security at your full retirement age , you receive your full benefit as calculated from your income history. Claim earlier than FRA, and your benefit is reduced, but if you claim later than FRA, your benefit goes up.
In theory, your cumulative benefit should be the same no matter when you claim. Either you receive a longer stream of smaller payments or a shorter stream of bigger payments. But the totals of either stream should be the same.
Unfortunately, this theory can fail in real life if your life span is different from the norm. If you die early, for example, you can earn a lot less for claiming later. Likewise, if you die late, you could earn less for claiming early.
Can I Collect My Retirementbenefits Early
You can start collecting Social Security as early as age 62 but theres a catch. If you collect before you reach your full retirement age , youll receive a lower monthly payment permanently. For example, if your FRA is 67, but you begin to claim benefits at 62, youre signing up to get 30% less. However, this reduction will decrease for each month you wait after age 62, up until your FRA. Think of your FRA as your break-even point.
Age to receive full Social Security benefits2
65 + 2 months for every year after 1937
66 + 2 months for every year after 1954
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Dont Forget The Earnings Test
If you plan on working between age 62 and your FRA, then wait until your FRA to begin taking benefits. Why? Because the earnings test affects you if you continue to collect earned income as well as Social Security benefits before you reach your FRA. In such a case, your Social Security benefits will be reduced if your total earnings exceed the annual limit. If you have some months where your earnings are high enough that you’re no longer considered “retired,” your benefits may be re-calculated when you reach your FRAand it could take 13 to 14 years for you to get back the amount that was withheld.
Do Survivor Benefits Increase After Full Retirement Age
If you are the surviving spouse who is claiming benefits based on your deceased partner’s work record, there is no benefit to waiting until after FRA to claim your benefits. You do not earn delayed retirement credits, so your benefit will not increase.
However, if you are the higher-earning spouse, delaying your claim for benefits until after FRA can result in your widow receiving more monthly income, as your widowed partner will receive the higher of the two monthly benefits you were each receiving.
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Fact #: Social Security Provides A Guaranteed Progressive Benefit That Keeps Up With Increases In The Cost Of Living
Social Security benefits are based on the earnings on which you pay Social Security payroll taxes. The higher your earnings , the higher your benefit.
Social Security benefits are progressive: they represent a higher proportion of a workers previous earnings for workers at lower earnings levels.
Social Security benefits are progressive: they represent a higher proportion of a workers previous earnings for workers at lower earnings levels. For example, benefits for a low earner retiring at age 65 in 2020 replace about half of their prior earnings. But benefits for a high earner replace about one-quarter of prior earnings, though they are larger in dollar terms than those for the low-wage worker.
Many employers have shifted from offering traditional defined-benefit pension plans, which guarantee a certain benefit level upon retirement, toward defined-contribution plans s), which pay a benefit based on a workers contributions and the rate of return they earn. Social Security, therefore, will be most workers only source of guaranteed retirement income that is not subject to investment risk or financial market fluctuations.
Once someone starts receiving Social Security, their benefits increase to keep pace with inflation, helping to ensure that people do not fall into poverty as they age. In contrast, most private pensions and annuities are not adjusted for inflation.
Earned Income Before Age 66 Or 67
The Social Security Administration defines your full retirement age as the day you are able to start collecting benefits. It depends on the day you were born, and for most people ends up being about age 66 or 67. But you’re allowed to retire, as the SSA defines it, as early as age 62. If you reach this age and you are still working, you may wish to start receiving your benefits right away, but this doesn’t always make the most sense in the long run.
Why? Because if you earn over the earnings limit, your benefits will be reduced. The SSA uses your own income to figure how much they should pay each month, and if you’re making money they assume you don’t need the full amount. But once you reach full retirement age your benefit each month will stay the same, whether or not you have any other sources of income.
You should also keep in mind that when tax season rolls around, your benefits are counted as income, and so your monthly check from the SSA will be taxed along with any other income you earn.
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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.
Exceptions To The Usual Schedule
Your payment will arrive on an alternate schedule if you fall into certain categories. It will be made on the third day of the month if:
- Your state is paying your Medicare premiums
- You started receiving benefits prior to May 1, 1997
- You reside in another country
- You’re receiving both Social Security benefits and SSI payments
But there’s an exception to the Social Security/SSI rule. You’ll receive payment on the first of the month rather than the third day if you’re receiving SSI due to disability, blindness, or age.
SSI is needs-based. It’s not something you paid into over the course of your working career, like Social Security retirement or disability benefits or Medicare, so it’s possible to collect for these reasons without also receiving Social Security retirement or disability benefits. SSI is intended to pay for basic food, shelter, and clothing needs.
Your payment will come the weekday just before the usual date if your payment date falls on a weekend or a federal holiday.
You can find calendars on the Social Security Administration’s website, Schedule of Social Security Benefit Payments 2021, to pin down the exact dates in 2021 depending on your circumstances.
An Example Of Taxed Benefits
Lets say you receive the maximum Social Security benefit for a worker retiring at FRA in 2021: $3,148 per month. Your spouse receives half as much, or $1,574 a month. Together, you receive $4,722 a month, or $56,664 per year. Half of that, or $28,332, counts toward your combined income for determining whether you have to pay tax on part of your Social Security benefits. Lets further assume that you dont have any nontaxable interest, wages, or other income except for your traditional individual retirement accounts required minimum distribution of $10,000 for the year.
Your combined income would be $38,332half of your Social Security income, plus your IRA distributionwhich would make up to 50% of your Social Security benefits taxable because youve exceeded the $32,000 threshold. Now, you may be thinking, 50% of $56,664 is $28,332, and Im in the 12% tax bracket, so the tax on my Social Security benefits will be $3,399.84.
Fortunately, the calculation takes other factors into account, and your tax would be a mere $225. You can read all about the taxation of Social Security benefits in the Internal Revenue Service Publication 915.
Divorced Spouse Social Security: Recent Rule Change
The basic rules for divorced spouses and Social Security say that if an individual was married for at least 10 years and then divorced, they are eligible to collect spousal benefits on the earnings record of their ex-spouse as long as they are at least 62 years of age and currently single. The divorced spouse can collect on the ex-spouses account under these circumstances even if the ex-spouse has remarried.
Furthermore, if the couple has been divorced for at least two continuous years, the ex-spouse can claim benefits based on the other partners earnings even if the latter has yet to file for benefits. This contrasts with the rules for current spouses, who cant collect benefits unless their spouse is already collecting them.
Ex-spouses who were born on or before Jan. 1, 1954, are allowed to file a restricted claim for spousal benefits at their full retirement age and suspend their own benefits until later, a practice known as file and suspend. This allows their own benefit to keep growing by 8% a year up to age 70, when their benefit maxes out. At that pointor sooner, if they wishthey can switch over to their own, higher benefit.
However, under the rule change, divorced spouses who were born on or after Jan. 2, 1954, are deemed to be filing for all available benefits when they apply for Social Security. They will automatically receive whichever benefit is higher, but they can no longer take one type of benefit now and switch to another one later.
No More File And Suspend
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.
Should My Wife Take My Social Security Benefit
Q: I would like your opinion on a Social Security question we have for my wife. First, Iâll give you basic information. My name is Bob. I am 69 years old and am on Social Security and I net $2,136 monthly. My gross Social Security benefit monthly is $2,284.50. My wife is 61 years old and will turn 62 in August of 2022.
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How Do I Estimate My Monthly Retirement Benefits
You can estimate your monthly retirement benefits by calculating your PIA, the monthly benefit youre eligible to receive once you reach your FRA. To determine your PIA, the Social Security Administration uses your best 35 years of employment to arrive at your Average Indexed Monthly Earnings . If you havent worked for 35 years, some of the included earnings may be zero.
If you continue working after reaching your FRA, the SSA will automatically recalculate your benefits each year you continue to work. If your current income is greater than any of your previously calculated best 35 years, your benefits will be adjusted upward. The increase generally will be made in October of the following year but will be retroactive to January 1.
Social Security retirement benefits are automatically modified each year for cost-of-living adjustments , which are either positive or zero never negative. COLAs are based on the Consumer Price Index and have averaged between 1% and 2% over the past 10 years.
For more information, the SSA offers a helpful Social Security retirement calculator.
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Different Rules For Survivor Benefits
The rule about not switching benefits does not apply to Social Security survivor benefits, which divorced spouses may be eligible for if their former partner is deceased. Divorced spouses can file for survivor benefits as early as age 60 and switch over to their own benefit as early as age 62. They also have the option of filing for their own benefit first, as early as age 62, then filing for survivor benefits when they reach their FRA if that will result in a higher benefit.
Divorced spouses who are caring for their deceased spouses natural or legally adopted child who is younger than age 16or disabled and entitled to benefitscan apply at any age. In this case, the rule that the couple must have been married for at least 10 years is also waived. However, the benefits will last only until the child reaches age 16 or is no longer disabled.
When To Take Social Security Benefits
You can elect to receive Social Security benefits starting at age 62 or as late as age 70, though your full retirement age depends on the year when you were born. For example, your FRA is 67 if you were born in 1960 or later. If you elect to take your benefit before it, then your Social Security income will be reduced by as much as 30%. Although the total number of payments received will be higher than if you had waited until your FRA, your total lifetime payment could be lower.
When you reach your FRA, you receive a full benefit based on the amount of Social Security tax paid into the system through your lifetime, up to a maximum monthly benefit amount. Although fewer total checks are received, your total lifetime payout may be higher.
Those who are able to defer taking Social Security income until after their FRA are given a delayed retirement credit each year past that age until age 70, equivalent to an annual 8% increase for people born in 1943 or later. Waiting until age 70 results in the fewest number of checks received, but delivers a much higher monthly benefit.
To determine the most appropriate age for you to start taking benefits, you need to calculate your Social Security breakeven age.
When you elect to take benefits early, you make a permanent choicemeaning that your benefits are reduced over the course of your lifetime, not just until your FRA.
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Whats Your Social Security Break
If youre looking to maximize your total lifetime Social Security payout, youll want to conduct a break-even analysis to determine when you should start drawing your benefits.
Your break-even age occurs when the total value of higher benefits starts to exceed the total value of lower benefits .
For example, if you are eligible to collect a reduced $900 benefit at age 62 plus 1 month, and your benefit would increase to $1,251 at age 65 and 10 months, your estimated break-even age is 75 years and 5 months.
If you expect to live beyond that age, it could make financial sense to delay drawing benefits. The Social Security Administrations life expectancy calculator can help you decide.
When it comes to calculating a start date for Social Security benefits, however, theres not an age thats appropriate for everyone. Consider your own financial needs, health and other retirement plans before making the call. If you cant reasonably afford to live without taking benefits, it may make little sense to delay taking your benefit.