Monday, May 16, 2022

When Should I Start Social Security Payments

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Q Do My Social Security Decisions Affect My Spouses Benefits

7 GOOD REASONS to File for Social Security Benefits at Age 62

A. Yes and vice versa. If youre married and full retirement age or older, youll receive either your own Social Security benefit or one-half of your spouses benefit, whichever is greater. This is known as spousal benefit.

This can be a good option if one spouse has earned a lot less than the other over the years.

Also, delaying Social Security can increase the benefits for a surviving spouse. When one spouse dies, the other can usually get the greater of his or her existing benefit or the deceased spouses benefit. So, if the higher earner waited to start their benefits until their FRA or later, their benefit will be that much higher for the surviving spouse.

The Source Ofand Solution Tothe Problem

When the current Social Security formula was put in place in 1977, no provision was made for the contingency that economic conditions would be so dire that average wages would fall in any given year. This problem first surfaced in 2009 during the Great Recession. The AWI, however, fell by a relatively small amount, and policymakers chose not to do anything about it. As a result of the COVID-19 pandemic, however, the decline in the AWI is likely to be about four times as big now as it was during the Great Recession.

There is ample precedent for fixing this problem. The first precedent concerns Social Security cost-of-living allowances . As mentioned above, payments in years after beneficiaries first year of retirement are indexed to inflation using a version of the consumer price index . However, under the law, if prices fall in any year, benefits are not adjusted downward rather, they remain the same. The second precedent concerns the Social Security contribution and benefit base, also known as the taxable maximum. The taxable maximum is the dollar amount of annual earnings above which the Social Security payroll tax does not apply. The taxable maximum is indexed to the AWIbut like COLAs, it is never adjusted downward.

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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When Your First Benefit Will Be Paid

Only 7% of people can actually receive their Social Security earned income for the calendar month of their birthday, and of that small group, none will collect the benefit during the calendar month of their birthday. This is due to the odd way that the Social Security Administration segments people based on their birthday, and SSA rules around schedule of payments.

It helps to know that the SSA considers you to be born 24 hours before you were truly born. So, if you were born on April 1, the SSA considers you to have been born on March 31. If you were born on April 2, it considers you to have been born on April 1. This is important because Social Security benefits are not paid for partial months in order to receive benefits for a given month, a beneficiary must be eligible for those benefits every day of that month.

Thus, for people who turn 62 in April, only those born on April 1 and April 2 are able to receive a benefit in the month when they turn 62. Otherwise, the first Social Security payment will be for the month of May.

But this is only part of the story, since receiving a benefit for the month of your birthday is not the same as receiving a benefit during the month of your birthday. Social Security benefits including earned, survivor and disability are paid a month late, meaning that a benefit that relates to the month of April will be paid out in May.

You Already Have Your 35 Highest

Should I Collect Social Security Before Railroad ...

Your Social Security benefits are based on your earnings in the 35 years that you had the most compensation. If you’re in your peak earning years, you could boost your benefits if you keep working a few more years and delaying your benefits. However, if you aren’t going to increase your average earnings, such as if you’re only working part-time or you’ve had to retire early, you won’t miss out on the chance to boost your benefits with higher earning years. However, you’ll still receive a smaller benefit for not waiting until full retirement age.

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Before You Make Your Decision

There are advantages and disadvantages to taking your benefit before your full retirement age. The advantage is that you collect benefits for a longer period of time. The disadvantage is your benefit will be reduced. Each person’s situation is different. It is important to remember:

  • If you delay your benefits until after full retirement age, you will be eligible for delayed retirement credits that would increase your monthly benefit.
  • That there are other things to consider when making the decision about when to begin receiving your retirement benefits.

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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.

Read Also: Taxes On Social Security Retirement Benefits

Determining Which Retirement Age Is Best For You

Should you take the money and run at age 62? Or hold out until you’re 70? Approximately 50% of people don’t wait past age 62, usually because they need the money, are convinced that Social Security might collapse at a later date, or are fearful of a short life span.

But is early retirement a good option for you? The questions below will help you decide.

Are you still working? Some people, especially construction workers and other physical laborers, are less physically able to handle work at 62, even though they don’t qualify for disability. They may be good candidates for early retirement. However, if you’re still able-bodied and interested in working, you might want to avoid claiming early retirement benefits. If you’re earning a high salary, you’ll miss the opportunity to boost your Social Security payment amount.

Second, you’ll lose one dollar in benefits for every two dollars you earn over the SSA’s earnings limit . There are no such deductions if you work after reaching full retirement age. The SSA provides an online earnings test calculator to determine whether working will lower your retirement benefits.

How’s your health? If you’re convincedâeither by genetics, research, or the amount of time you spend in doctors’ officesâthat you’ll have a shorter lifespan than your peers, it doesn’t make much sense to delay your retirement benefits.

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  • Report The Death Of A Social Security Or Medicare Beneficiary

    When To Start Taking Social Security Benefits

    You must report the death of a family member receiving Social Security or Medicare benefits. The Social Security Administration processes death reports for both. Find out how you can report a death and how to cancel benefit payments. In addition to canceling SSA and Medicare benefits, find out what other benefits and accounts you should cancel.

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    What Happens If You Claim After Your Fra

    If you wait until youre 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. You also need to weigh in some other factors, including your expected longevity and whether you plan to file for spousal benefits. You will also need to consider the tax, investment opportunity, and health coverage implications.

    Can A Person Who Is Due A Public Pension Also Collect Social Security Benefits

    Two rules could reduce benefits for people who are also entitled to a public pension on earnings not covered by Social Security.

    One rule is the windfall elimination provision , which applies to people who worked at jobs covered by Social Security but also worked as noncovered government employees and are due a pension.

    When it is time to claim benefits, many people are unprepared for these cuts, Mr. Blair said. Possible W.E.P.-related reductions are not reflected in the workers Social Security statement, which shows the history of annual earnings and estimates of future benefits only for jobs covered by Social Security.

    You can have someone who looks at the Social Security statement and it shows a benefit of $1,000 at full retirement age, Mr. Blair said. But the individual a teacher who is due a public pension, for example may be surprised later if the benefit is much lower, he said.

    In addition to W.E.P. reductions, a government pensioner who applies for a Social Security spousal or survivor benefit can face reductions. The government pension offset reduces those benefits by two-thirds of the government pension.

    Mr. Blair said individuals who are eligible for a public pension and Social Security can estimate their future benefits by running the numbers on the W.E.P. and G.P.O. calculators.

    Pensioners are exempt from the W.E.P. offset if they paid into Social Security for 30 years or more in jobs with substantial earnings .

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    The Bottom Line On When To Start Social Security

    Timing your Social Security benefits is a complex decision that will vary from person to person. Knowing the answers to the above questions will help you gauge when might be right for you, but consider speaking to a retirement professional, like a Certified Financial Planner , to map out when may be the right time to file for Social Security.

    Bringing Cost Of Living Into The Equation

    Should I start drawing down my savings or claim Social ...

    When you factor in the cost of living adjustment that SSA provides, there’s even a stronger case for George to wait. The SSA reasons that costs of living rise by 2% each year, and they reflect this as an increase in the monthly benefit checks.

    So with this added bonus, George can expect the more true figures to be as follows:

    • $479,047 if he started benefits at age 62
    • $541,840 if he started benefits at age 66
    • $567,416 if he started benefits at age 70

    If George lives to age 82, he will collect the maximum amount of income over his full life by waiting until age 70 to begin taking his benefits. In George’s case, his break even age is 80. This means that if he waits until age 70 to collect, he must live to at least age 80 to receive the same total dollars he would have received if he started taking benefits earlier.

    As you can see, there is a lot of money at stake. And of course, no one knows how long they’ll live with any certainty. But you can still make a solid choice about when to receive your Social Security benefit by weighing the many outcomes, as George did.

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    What Is The Future Of Social Security

    If youre 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 its better to have something than nothing. The 2020 annual report from the Social Security Trustees, released in April, projects that the Social Security Trust Fund has enough resources to cover all promised retirement benefits until 2035, and will cover 79% of scheduled benefits for new retirees thereafter without changing the current system. The 2020 report does not include an adjusted projection due to impacts, if any, from the pandemic.

    Over the longer term, changes such as later benefit dates or means testing may be considered.

    In any situation, if youre particularly concerned about the future prospects for Social Security, thats a good reason to save more, and earlier, for your retirement.

    Supplemental Security Income Benefits

    Supplemental Security Income helps people who are unable to earn sufficient wages on their own. It is available to adults with disabilities, children with disabilities and people 65 or older. Individuals with enough work history may be eligible to receive SSI in addition to disability or retirement benefits. The amount individuals receive varies based on their other sources of income and where they live.

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    You’re Planning Your End

    Your Social Security benefits stop paying at your death, so if you die prior to collecting benefits, you’ll have missed out on benefits entirely. You need to figure out how to maximize your Social Security income, instead. For example, say you’re planning to wait until age 70 so you can claim the larger monthly benefit. If you die right before your 70th birthday, you won’t receive any benefits. It’s very difficult to predict how long you’ll live, especially if you’re in good health now. However, if you are suffering from a terminal or serious illness, the increased monthly benefit for delaying Social Security might not be worth it.

    Will My Benefit Be Credited With The 59% Cola If I Turn 62 In December 2021

    Should you take your Social Security benefits at age 62?

    I turn 62 on 12/26/21. If I opt to start taking SS in Dec 2022 , will my benefits see the 5.9% COLA increase that is due to happen in 2022?

    Hi. Yes. People born prior to January 2 1960 will have the upcoming 5.9% cost of living increase added to their Social Security retirement benefit rate regardless of when they start drawing their benefits.

    Best, Jerry

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    Apply For Retirement Benefits

    Starting your Social Security retirement benefits is a major step on your retirement journey. This page will guide you through the process of applying for retirement benefits when youre ready to take that step. Our online application is a convenient way to apply on your own schedule, without an appointment. You can also apply by phone or by appointment at a Social Security office.

    What Is Full Retirement Age

    In addition to how much youve earned over the years, the size of your monthly Social Security benefit depends on when you were born and the age when you start claimingdown to the month.

    Youll receive your full monthly benefit if you start claiming when you reach what Social Security considers your full retirement age , sometimes also referred to as normal retirement age. FRA was 65 when Social Security began, but it has been raised to 67 for anyone born in 1960 or later. To find your FRA, see the chart below.

    Finding Your Full Retirement Age

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    How Does Work Affect Your Social Security Payments

      Many people continue to work beyond retirement age, either by choice or out of necessity. But if you are receiving Social Security benefits, you need to be aware of how working can affect your benefit payments. Earning income above Social Security thresholds can cause a reduction in benefits and mean your benefits will be taxed.

      Whether it makes sense to work and collect Social Security at the same time is a complicated assessment that depends on how much you earn and when you begin taking Social Security benefits.

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      If you work and are full retirement age or older, you can earn as much as you want and your benefits will not be reduced. However, individuals may begin taking Social Security retirement benefits early beginning at age 62. If you are younger than full retirement age, there is a limit to how much you can earn and still receive full benefits. If you earn more than $18,960 , Social Security will deduct $1 from your benefits for each $2 you earn over the threshold. In the year you reach full retirement age, you can earn up to $50,520 without having a reduction in benefits. However, if you exceed $50.520 in earnings, Social Security will deduct $1 from your benefits for each $3 you earn until the month you reach full retirement age. Once you reach full retirement age, your benefits will no longer be reduced.

      For more information on Social Security, .

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