Monday, May 16, 2022

When Should I Take Social Security Benefits

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What Happens If I Work And Get Social Security Retirement Benefits

Clark’s Take on Delaying Your Social Security Benefit

You can get Social Security retirement benefits and work at the same time. However, if you are younger than full retirement age and make more than the yearly earnings limit, we will reduce your benefit. Starting with the month you reach full retirement age, we will not reduce your benefits no matter how much you earn.

  • We use the following earnings limits to reduce your benefits: If you are under full retirement age for the entire year, we deduct $1 from your benefit payments for every $2 you earn above the annual limit.

For 2021 that limit is $18,960.

  • In the year you reach full retirement age, we deduct $1 in benefits for every $3 you earn above a different limit, but we only count earnings before the month you reach your full retirement age.

If you will reach full retirement age in 2021, the limit on your earnings for the months before full retirement age is $50,520.

Starting with the month you reach full retirement age, you can get your benefits with no limit on your earnings.

Use our Retirement Age Calculator to find your full retirement age based on your date of birth.

Use our Retirement Earnings Test Calculator to find out how much your benefits will be reduced.

What counts as earnings:

Your benefits may increase when you work:

When youre ready to apply for retirement benefits, use our online retirement application, the quickest, easiest, and most convenient way to apply.

If you need to report a change in your earnings after you begin receiving benefits:

How Will Working Affect Social Security Benefits

In a recent survey, 68% of current workers stated they plan to work for pay after retiring.1

And that possibility raises an interesting question: how will working affect Social Security benefits?

The answer to that question requires an understanding of three key concepts: full retirement age, the earnings test, and taxable benefits.

When Should You Start Collecting Social Security Benefits

To determine when you should start taking your benefits, its important to understand how much your check is affected by when you claim your benefit. As mentioned before, you can claim your benefit as early as age 62, but reaching full retirement age can secure your full benefit.

So when exactly is full retirement age? That depends on when you were born.

Year of birth
65 + 2 months for each year past 1937
1943-1954
66 + 2 months for each year past 1954
1960 and later67

While the full retirement age used to be 65, changes to the program have increased that age. For example, those born in 1955 now have to wait an extra two months beyond age 66 to claim their full benefit. Someone born in 1959, for example, would have to wait until age 66 and 10 months to get the full benefit. Anyone born in 1960 or later, receives their full benefit at 67.

But some retirees choose to wait even longer. You may wait until as late as age 70 to claim your benefit, but then you must take it. Youll receive a bigger check for doing so.

So what is the upside to delaying your Social Security benefit after age 62? Your check wont get hit by a serious benefit reduction. Heres how much a $1,000 monthly check will become if you claim your benefit as soon as youre eligible at age 62.

Year of birthIf you file at 62, benefit reduced by:A $1,000 check becomes
$700

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You Have A Shorter Life Expectancy

The government incentivizes waiting to collect your Social Security benefits by giving you a larger monthly amount the longer you delay. For example, if you start collecting benefits at age 62 when your full retirement age is 66, your monthly benefit will be about 75% of your full-age benefit. So if you expected your monthly benefit to be $1,000 per month at 66, you would only receive around $750 at 62.

Although a larger monthly benefit might sound great, keep in mind that youd have to wait four years to get that extra $250 per month. You would receive $36,000 during those four years at the reduced amount of $750 per month.

When you start collecting $1,000 at age 66, that extra $250 per month wont let you break even for 12 years compared to collecting early. If your health is declining and you dont expect to live until youre 78, youll receive more in benefits during your lifetime if you start claiming as soon as possible.

The Bottom Line On When To Claim Your Social Security

Should I Take Social Security Benefits While Working ...

Every individuals and couples needs are different when it comes to claiming Social Security. But maybe waiting until age 70 is something we should seriously consider.

Even if youve already filed, you may find that youre eligible for a do-over. You can withdraw your application for up to 12 months after you file, and reapply later. But you only get one do-over. If it makes sense for you to do this, youll have to pay back the Social Security benefits that you received, and in many cases your IRA or 401 may be where you have to get that money.

If you arent sure which Social Security claiming strategy is the best fit for your needs and goals, talk to a financial adviser who is knowledgeable about retirement income planning and, specifically, Social Security benefits. An experienced professional can lay out all your options and help you work out a timeline.

Kim Franke-Folstad contributed to this article.

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When Should I Take Social Security Benefits

Melissa A. Seamon, CFP®

Financial Advisor

When Should I Take Social Security Benefits?

If youre nearing retirement, youve probably spent some time considering this question. Unfortunately, its a simple question with a complex answer, and theres no one time that is best for everyone. Its an individual decision that depends largely on your personal circumstances, both past and present.

Ultimately, the choice of when you begin taking social security benefits will affect how much you receive, so youll want to understand the following key information to help you zero in on a timeline that best benefits your overall retirement picture.

Whats the age of full retirement?

Full Retirement Age , also known as the normal retirement age, is the age at which the Social Security Administration deems an individual can receive their fullsocial security retirement benefits upon leaving the workforce. For decades, everyones full retirement age was 65, but the SSA amended the rules over the years so that your FRA is now dependent on the year you were born. Currently, those born in or after 1951 will reach full retirement age sometime between 65 and 67. You can check your age of full retirement using this free Social Security Administration calculator.

What happens if I take my social security benefits early?

What happens if I delay taking social security benefits?

Which Option is Right for Me?

Your current and future financial standing

Your retirement plans

No One Else Is Relying On Your Benefits

In the event of your death, a surviving spouse, minor or disabled child can receive money from the Social Security Administration based on the amount of your benefits. For example, a surviving spouse can receive between 71.5% and 100% of your benefit amount, depending on the surviving spouses age. A disabled child can receive 75% of your benefits each month even after youre gone.

If no one else can qualify for benefits based on your record, you might want to retire early because no one is depending on that money. If everything else falls into place and you meet the minimum Social Security retirement age, consider collecting your benefits early and enjoying life.

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You Want The Money Now

Even if you don’t need your benefits early to support yourself, you may have other reasons for wanting to take them as soon as possible. Some people, for example, are concerned that Social Security may be unable to meet all of its obligations in the future, so they might as well get theirs now. Others believe they could do better by collecting benefits and investing them, rather than leaving it in the government’s hands.

That said, you would have to be a skilled investor to beat the 6% to 8% guaranteed annual return on your money that Social Security offers to those who wait until full retirement age or later.

Social Security Benefits For Surviving Spouses

Social Security Tips

If your spouse was receiving Social Security benefits upon their death, you must report the death as soon as possible. You can call the Social Security Administration at 1-800-772-1213 between 7 a.m. and 7 p.m. on weekdays or visit your local Social Security office in person.

You are eligible for a one-time, lump-sum death benefit of $255 from Social Security if:

  • You were receiving benefits on your spouses record at the time of death, or
  • If you were living in the same household as your spouse at the time of death.

Any benefits received in the name of your spouse during the month of death or later must be returned to the Social Security Administration as soon as possible.

If your spouse worked long enough under Social Security, you may be eligible for Social Security benefits. You must be age 60 or older or disabled and 50 or older to qualify.

How much youll receive depends on the percentage of your spouses benefit as well as your age and the type of benefit youre eligible for.

You must apply for survivor benefits in person. You can call Social Security at 1-800-772-1213 to request an appointment.

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How To Calculate Your Social Security Break

Deciding when to take Social Security retirement benefits is important because it can directly affect your benefit amount. While you can technically start taking benefits as early as 62, youd receive them at a reduced amount. On the other hand, you could delay taking benefits up to age 70. Calculating your Social Security break-even age can help you decide when the best time is to begin taking benefits. You can do that using a Social Security break-even calculator. Additionally, it may behoove you to consult with a financial advisor about when its best for your particular situation to begin receiving Social Security.

Bringing Cost Of Living Into The Equation

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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When To Take Social Security: It Pays To Wait

Welcome to the Academys toolkit on When to Take Social Security: It Pays to Wait! The materials in this toolkit are designed to educate workers approaching retirement about their options for taking Social Security benefits, and about why it can pay to wait.

Social Security benefits can be taken at any time between 62 and 70, but there are sound financial reasons to delay if you can. If you wait, your monthly benefits will be higher for the rest of your life.

  • If you need Social Security to make ends meet, take it youve earned it.
  • But if you can wait, even a year or two, your monthly benefit will be higher for the rest of your life.
  • If youre married, you have two lives to plan for. If you are the higher earner, waiting to take Social Security means providing a higher survivor benefit for your spouse if she or he outlives you.

Resources include:

  • Brochure : Thinking about Retirement? Heres an important question: When Should I Take Social Security?

Partner Resources:

in partnership with The National Urban League

Before You Make Your Decision

My husband died. Whose Social Security should I take? in ...

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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You Expect Your Investments To Grow Faster Than The Increased Benefit

If youre the next Warren Buffet, its possible you could do better taking Social Security early and investing the money than you could by waiting to take a larger benefit later. When weighing the best decision, consider the inflation rate, the rate your benefits increase and how much you can expect to earn in your portfolio. Given that benefits increase by 8 percent per year for each year you wait after full retirement age, however, its hard to outperform that rate of increase in the market. These safe investments do have high returns.

Social Security Benefits If Youre Married

Determining Social Security calculations is a bit more complicated if you are married because you have the option to base benefits on your spouses salary history.

If the lesser earning spouses benefits are based on the higher earning spouses, then the limit of those earnings will be 50 percent of the higher earning spouses benefit amount.

To illustrate this, lets talk about A and B, a married couple.

  • A makes significantly more money than B.
  • A makes so much more money that As monthly Social Security benefits are going to be more than twice of Bs, based on Bs salary history.
  • The good news for B is that they can choose to have their Social Security benefits based on As salary history and can receive as much as 50 percent of As monthly benefit. This is the case even if B didnt hold a job outside the home.

On the other hand, if Bs monthly benefit would have been more than half of As, based on Bs salary history, then B can claim that amount.

In short, B can claim the higher of these two possibilities: Bs own Social Security earnings or half of As.

This all assumes that B doesnt begin claiming benefits until B reaches full retirement age. If B begins claiming earlier, then Bs benefits will be less. In addition, if B is claiming benefits based on As earnings, then B does not benefit by waiting later than full retirement age.

B will not be given more monthly benefits if B waits until age 70, for example, based on As earnings.

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You Need To Pay Down Debt

There are some debts you need to tackle before you retire. If you have high-interest debt, claiming Social Security early can help you pay the debt down. Depending on the interest rate youre paying, the 8% yearly boost to your benefits that you receive for each year you wait past full retirement age might not be worth the increased monthly benefit. Using the early benefits to reduce or eliminate your debt earlier could mean youll be able to keep more of your benefits in the future.

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Do You Have An Immediate Use For The Money

Should you take your Social Security benefits at age 62?

One of the most common reasons for taking Social Security early is simply because you need it. If your Social Security benefit is the only way you can keep the lights on, then its reasonable to file for it when you need it. However, its important to remember that working longer in your 60s to delay Social Security may be far easier than living on a reduced benefit in your 80s, especially if youre physically able to work now.

But what if you have no immediate use for the money but think you might be able to manage it better than Uncle Sam? Your Social Security benefit can feel like free money you can take now to grow into larger retirement income later. But Weston and Kate Horrell, an Accredited Financial Counselor and the founder of KateHorrell.com, dont see this as the optimal use of your Social Security benefit.

You may invest your Social Security income, but it does not count as earned income to be placed into an individual retirement account , Horrell points out. That means if Social Security is your only income, you may not be able to contribute to an IRA, and if it isnt, youll be limited to the lesser of $7,000, the IRA contribution limit for those over 50, or the amount you make outside of Social Security.

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