Wednesday, June 15, 2022

When Should You Start Receiving Social Security Benefits

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Get Ssa Benefits While Living Overseas

Social Security – When Should You Start Receiving Retirement Benefits?

U.S. citizens can travel to or live in most, but not all, foreign countries and still receive their Social Security benefits. You can find out if you can receive benefits overseas by using the Social Security Administrations payment verification tool. Once you access the tool, pick the country you’re visiting or living in from the drop-down menu options.

I Dont Have Anything Saved What Should I Do

Your options are limited here, but there are moves that may get some Social Security income flowing now while preserving the possibility of higher benefits later.

One strategy is to claim benefits now but suspend them later to accumulate what are known as delayed retirement credits. Lets say our out-of-work 62-year-old claimant finds a new job at 64. When she reaches her full retirement age, she could suspend her benefits and begin accruing delayed credits, calculated from her already reduced benefit. Doing so would add roughly $50,000 to her lifetime benefit, Mr. Meyer said. And if she waits until 63 to make her initial filing and then executes this suspend strategy, the addition to her likely lifetime payout will rise to about $71,000.

You can only suspend once, but it does add an element of flexibility that can result in more cumulative benefits, Mr. Meyer said.

People who gain new employment while receiving Social Security should be aware of one complication here. Its called the retirement earnings test.

If you claim benefits before your full retirement age and keep working, Social Security withholds a portion of your benefits if your earnings exceed certain amounts, a figure known as the exempt amount.

Your Social Security Retirement Options: Early Full And Late Retirement

You may opt to receive benefits early , at full retirement age, or after full retirement age. Your full retirement age varies between 66 and 67 depending on when you were born.

If you claim benefits before full retirement age. Almost 40% of retirees claim benefits as soon as they turn 62 . If you claim early retirement, you’ll receive up to 25% less than you would have if you’d waited until full retirement age .

If you claim benefits at full retirement age. Although claiming at full retirement age entitles you to “full” retirement benefits, you’re actually given an incentive to wait even longer, as described next.

If you claim benefits after full retirement age. From your full retirement age until you reach age 70, the Social Security Administration will increase your benefits by 8% per year.

Let’s see how this plays out. Imagine that you’d receive $21,180 annually if you retired at your full retirement age . If you retired early, at age 62, you’d receive only about $15,885 in Social Security annually from retirement until the end of your life. If you waited to retire until age 70, you’d receive about $28,000 annually, an 87% increase in monthly payments over claiming them at age 62.

Recommended Reading: How To Claim Social Security At 62

What’s Full Retirement Age

Full retirement age is when you’re eligible to receive full Social Security benefits. Your full retirement age depends on your birth year: Under current law, if you were born in 1955 or later, your full retirement age can be anywhere between age 66 and 2 monthsall the way up to age 67 for those born after 1959. If you were born before 1955, you’ve already reached age 66 and full retirement age.

Retirement ages for full Social Security benefits

If you were born in

Your full retirement age is

1954 or earlier

You Cant Work Anymore

Social Security

Even the best retirement financial plans and projections can go awry. For example, you might have planned on working until youre 70 so you could maximize your retirement benefits. If you get laid off at 62, however, and have difficulty finding another job, you might need to start taking your benefits just to get by.

Additionally, continuing to work in your industry simply might not be possible or healthy for you later in life. If your job requires manual labor, you might decide the risk of injury or other damage to your health isnt worth continuing to work. In this case, the healthier lifestyle youll get by retiring early could outweigh the smaller monthly Social Security benefit.

See: 17 Tips To Live Comfortably Off Just a Social Security Check

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How To Receive Federal Benefits

To begin receiving your federal benefits, like Social Security or veterans benefits, you must sign up for electronic payments with direct deposit.

If You Have a Bank or Credit Union Account:

  • Call the Go Direct Helpline at .

If You Don’t have a Bank or Credit Union Account:

Make Changes to an Existing Direct Deposit Account:

Learn how to make changes to an existing direct deposit account. You also may contact the federal agency that pays your benefit for help with your enrollment.

I Need Income Now Why Wait To Claim Social Security

Your claiming age matters a great deal. You can file as early as 62, but your annual benefit will be higher for every year you wait, until 70.

Social Security uses an actuarial formula tied to your full retirement age the point at which you can claim 100 percent of the benefit youve earned over the course of your working life. For example, if you turn 62 this year, your full retirement age is 66 and 8 months.

If you file before your full age, your benefit will be reduced as much as 6.7 percent annually, depending on when you claim. The bite is bigger than in the past because of changes enacted in 1983, when a gradual increase in the full retirement age from 65 to 67 was set in motion. Those increases, which still are being phased in, effectively set the bar higher for claiming a full benefit.

Filing at 62 this year means youll receive 72 percent of your full benefit, noted Richard W. Johnson, director of the program on retirement policy at the Urban Institute, compared with 80 percent for someone who was born in 1937 or earlier and retired at that age .

That lower income can really sting when you reach your 80s and out-of-pocket medical expenses and spending on home and residential care often surge, Mr. Johnson said.

Even a delay of a year or two past the full age can meaningfully increase benefits and mitigate your risk of falling short of income in retirement.

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What Else Affects Your Retirement Benefits

Everyones retirement is unique. Beyond deciding when to begin receiving retirement benefits, other factors that can affect your benefits include whether you continue to work, what type of job you had, and if you have a pension from certain jobs.

Continuing To Work

You can choose to keep working beyond your full retirement age. If you do, you can increase your future Social Security benefits. Each extra year you work adds another year of earnings to your Social Security record. Higher lifetime earnings can mean higher benefits when you choose to receive benefits.

Specific Types Of Earnings

While Social Security earnings are calculated the same way for most American workers, there are some types of earnings that have additional rules.

Earning types with special rules include:

Pensions And Other Factors

Pensions and taxes have the potential to impact your retirement benefit. Review the resources below on pensions and other factors you should consider:

When Your First Benefit Will Be Paid

When Should I Start Receiving Social Security?

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.

Also Check: My Social Security Payment

The Second Best Choice

Single Social Security claimants who want to hold off until age 70, but find they cant quite wait any longer should select age 69 for the best trade off, according to Christopher Jones, chief investment officer at Edelman Financial Engines.

That sacrifice may be as little as a few thousand extra dollars in additional lifetime benefits in exchange for starting a year earlier, according to Jones.

If youre single, well tell you you should wait until 70, Jones said. It is generally preferable to do so.

“But its not quite as critical as it is going from 66 to 67, or 67 to 68.

In a low interest rate environment, it’s hard to beat the potential increases for every year you delay claiming your benefits, Jones said.

Thats a guaranteed real rate of return backed by the federal government, Jones said. You cant get real rates of return at 6% to 8% right now not even close in the marketplace.

Costs Of The Solution

Two issues that are likely to arise in any discussion of fixing this problem are its cost to the Social Security trust fund and its cost to the federal budget. With regard to the cost to the Social Security trust fund, there are three ways to look at the issue.

One way is to view the cost relative to costs in a world in which no pandemic had occurred. For example, the cost could be measured using the economic assumptions in the most recent Social Security trustees report , which were formulated before the pandemic began. From this perspective, the cost would be zero because the legislative change would restore the world of Social Security benefits to what it would have looked like had there been no pandemic.

A second way of looking at the issue is to view the cost of the change relative to costs in a world that reflected economic assumptions indicative of the economic recession caused by the pandemic. From this viewpoint, there would be a cost associated with fixing the problem. For example, the chief actuary of the SSA estimates that if the AWI in 2020 were to fall 5.9 percent below its 2019 level, the AWI adjustments proposed by Chairman Larson would cost $90 billion in present-value dollars for the 75-year period from 2020 through 2094about 0.02 percent of taxable payroll over that period. . The cost over the 10-year period from 2020 to 2029 would be about $21 billion in nominal dollars.

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How Do Benefits Work And How Can I Qualify

While you work, you pay Social Security taxes. This tax money goes into a trust fund that pays benefits to:

  • Those who are currently retired

  • To people with disabilities

  • To the surviving spouses and children of workers who have died

Each year you work, youll get credits to help you become eligible for benefits when its time for you to retire. Find all the benefits Social Security Administration offers.

There are four main types of benefits that the SSA offers:

  • Learn about earning limits if you plan to work while receiving Social Security benefits

Reasons It Can Be Good

Social Security: When should you start receiving retirement benefits ...

There are several reasons it makes sense to start your benefit long before 70 to enable a higher-earning spouse to delay.

Delaying a higher benefit has a bigger payoff. Early filing penalties and delayed retirement credits are both applied on a percentage basis. That means the larger your benefit, the bigger the impact of early or late filing.

Say your standard benefit is $800 per month and your spouse’s standard benefit is $1,700 per month.

  • If you claim early and are subject to a 25% early filing penalty, your benefit shrinks by $200 per month.
  • If your spouse claimed early, that same 25% penalty would result in a $425 benefit reduction.

Likewise, delayed retirement credits applicable after hitting full retirement age are also applied on a percentage basis.

If you pass up the opportunity to earn a 24% benefit boost, you give up the chance to raise your checks by $192. But your higher-earning spouse gives up the chance to earn a $408 boost.

You can maximize your survivor benefits. When one spouse dies, the surviving spouse gets to keep the higher of the two benefits. It pays off to enable your higher-earning spouse to put off claiming their checks to raise their benefits — even if that means claiming yours early.

But you can start getting your own checks to help support both of you. Then, when your spouse does file and you become eligible for spousal benefits, you can switch to them if it makes financial sense.

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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.

Tax Considerations For Social Security Benefits

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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Youre Only Working Part Time

If you claim Social Security prior to your full retirement age while still holding down a part-time job, you might have your benefits reduced if your work income exceeds the annual limit. For 2021, if you are under full retirement age, your benefits go down by $1 for every $2 your income exceeds $18,960. If you reach full retirement age in 2021, your benefits go down by $1 for every $3 your income exceeds $50,520 prior to reaching full retirement age. If youre working part-time to help make ends meet, taking Social Security at 62 might make sense.

How Does Full Retirement Age Affect Your Social Security Benefits

Social Security: When should you start receiving retirement benefits?

If you claim your benefits at full retirement age, you will receive your standard Social Security benefit amount. If you claim prior to FRA, you will be subject to early filing penalties that reduce your benefit by the following amounts:

  • 5/9 of 1% for each of the first 36 months before FRA
  • 5/12 of 1% for each subsequent month before FRA

This amounts to a 6.7% annual reduction for each of the first three years and an additional 5% reduction for each following year before FRA. If you claim benefits at 62 with an FRA of 67, you will face a full 30% reduction in benefits.

By contrast, if you claim benefits after FRA, you receive delayed retirement credits valued at 2/3 of 1% per month. This results in an 8% annual increase to your monthly benefit. Delayed retirement credits can be earned until age 70, after which time there is no financial benefit to delaying your claim. Delayed retirement credits cannot be earned if you are claiming either spousal or survivor benefits.

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