Claiming Social Security Benefits At The Right Time Means More Money In Your Pocket Here’s A Guide To Everything From Knowing Your Full Retirement Age To Taking Social Security Spousal Benefits
For many Americans, Social Security benefits are the bedrock of retirement income. Maximizing that stream of income is critical to funding your retirement dreams.
The rules for claiming Social Security benefits can be complex, but this guide will help you wade through the details. By educating yourself about Social Security, you can ensure that you claim the maximum amount to which you are entitled.
Here are 12 essential details you need to know.
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. If you are still receiving health insurance from your or your spouses employer, however, then you might not yet have to enroll in Medicare.
On March 17, 2020, all Social Security offices were closed completely due to the COVID-19 pandemic. As of Aug. 5, 2021, they 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.
Can I Still Work And Collect Social Security Benefits
You can collect Social Security benefits while working, starting at age 62. However, your age and earnings may impact the amount of benefits you receive during that time. Working won’t permanentaly reduce the Social Security benefits you receive, nor will your withheld benefits disappear.
Once you reach full retirement age:
- Your monthly benefit will increase, taking into account prior benefits detained due to earnings.
- Extra income no longer decreases your benefits.
If you work and collect Social Security when you are:
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If You’re Not Sure Why You Received A Payment
Contact the authorizing agency directly to find out why they sent the payment. You may be able to find the authorizing agency in the memo line of the check. View this diagram of a sample Treasury check to help you locate the authorizing agency contact information on your own check. Scroll about half way down the page to see the diagram.
If you’re unable to find which agency authorized the payment, . They can help you determine which government agency you need to contact. To find which RFC you need to call, look for its city and state at the top center of the check.
Use the Treasury Check Verification System to verify that the check is legitmate and issued by the government.
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, then 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, then you may have to pay tax on up to 85% of your benefits.
Merrill: Talk A Little More About That How Might Postponing Your Payments Work To Your Benefit
Storey: Well, imagine that at age 66 youâre entitled to an annual Social Security benefit of $10,000. If you wait a year to claim it, you’ll forgo the $10,000 for the first year, but the following year at age 67, youâll receive an annual benefit of $10,800 or 8% moreâan amount, by the way, that is adjusted for inflation, if any, each year for the rest of your life.
Social Security Disability Spousal Benefits
The spouse of a disabled worker may qualify for benefits. To qualify, the spouse must be:
- At least 62 years old
- Any age and care for the spouses child who is under age 16 or disabled
The spousal benefits begin when the disabled workers benefits start. It ends at the death of the disabled worker or the spouse, or when the SSA determines that the person no longer qualifies.
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What If I Take Benefits Early
If you choose to receive your Social Security check up to 36 months before your full retirement age, be aware that your benefit is permanently reduced by five-ninths of 1% for each month.
If you start more than 36 months before your full retirement age, the benefit is further reduced by five-twelfths of 1% per month, for the rest of retirement.
For example, lets assume that you stop working at age 62. If your full retirement age is 66 and you elect to start benefits at age 62, the reduced benefit calculation is based on 48 months. This means that the reduction for the first 36 months is 20% and 5% for the remaining 12 months. Overall, your benefits would be permanently reduced by 25%.
Social Security Can Help You Start Or Return To Work
If you rely on Supplemental Security Income payments or Social Security Disability Insurance benefits and want to start or return to work, we can help.
Ticket to Work is a program that supports career development for SSDI beneficiaries and SSI recipients who want to work and progress toward financial independence. The Ticket program is free and voluntary. Learn more about the Ticket to Work program at www.ssa.gov/work or call the Ticket to Work Help Line at 1-866-968-7842 or 1-866-833-2967 Monday through Friday, 8 a.m. to 8 p.m. ET.
In addition to the Ticket to Work program, the Plan for Achieving Self-Support program also helps people with disabilities return to work. A PASS allows you to set aside resources and other income besides your SSI for a specified period. With a PASS you can pursue a work goal that will reduce or eliminate your need for SSI or SSDI benefits.
How does a PASS help someone return to work?
We base SSI eligibility and payment amounts on income and resources .
PASS lets a person with a disability set aside money and items they own to pay for items or services needed to achieve a specific work goal.
The objective of the PASS is to help people with disabilities find employment that reduces or eliminates the need for SSI or SSDI benefits.
You can read all about the PASS program at www.ssa.gov/pubs/EN-05-11017.pdf.
For more information about PASS, read The Red Book – A Guide to Work Incentives at www.ssa.gov/redbook.
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Cola Increases By Year
Note: COLA changes take effect the next Jan. 1
Social Security is funded by a payroll tax of 12.4 percent on eligible wages employees pay 6.2 percent and employers pay the other 6.2 percent . Next year, the maximum amount of wage earnings subject to the Social Security tax will increase to $147,000 from $142,800 in 2021. The money paid in by today’s workers goes to cover current benefits, with any excess going into the Social Security Trust Fund.
Because there are fewer workers relative to the growing number of Social Security beneficiaries, the Social Security system is facing increased stress. In their 2021 annual report, Social Security’s Trustees estimated that if no legislative action is taken, the trust fund for retired workers and their survivors will run short of money in 2033. Even at that point, over three-quarters of benefits could still be paid out from incoming payroll taxes. A separate Trust Fund that pays disability benefits is projected to run short of money in 2057.
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Waiting To Receive Social Security Benefits
If you delay receiving Social Security benefits until after full retirement age, you will get benefit credits that increase the amount you receive once you do start. But that increase stops once you’ve reached age 70.
For example, if your full retirement age is 67, you would receive an 8% increase each year that you postpone receiving your benefits until you reach age 70. However, if you delay receiving your benefits, you must still apply for Medicare before age 65. You can start the process, called open enrollment, three months before the month of your 65th birthday. Your open enrollment lasts for three months after the month you turn 65.
If you miss your open enrollment, or you don’t enroll in Medicare Part B because you have coverage through work or a spouse, you’ll have opportunities to enroll later.
If you don’t sign up for Medicare Part B during open enrollment and you don’t have other coverage, you could be charged a penalty of 10% for each year you delayed enrollment once you do enroll.
Spouses And Social Security
You can claim Social Security benefits based on your spouse’s work record. If claiming spousal benefits provides more, claiming before your FRA on a spouse’s record means you’ll lose even more than claiming on your own recordthe benefit reduction for a spouse is up to 35% while the reduction for claiming your own benefit is up to 30%. For instance, if you’re the spouse of Colleen in the above example and you are the same age, you’d be eligible for only $650 a month at age 6235% less than the $1000 a month you would get at your FRA of 67.
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Your decision to take benefits early could outlive you. If you were to die before your spouse, they would be eligible to receive your monthly amount as a survivor benefitif it’s higher than their own amount. But if you take your benefits early, say at age 62 versus waiting until age 70, your spouse’s survivor Social Security benefit could be up to 30% less for the remainder of their lifetime.
Q& a: When To Start Spousal Benefits
Dear Liz: At what age do Social Security benefits stop for dependents? My child is 17 and is currently getting half of my Social Security amount. When her benefits stop, can I sign up my nonworking spouse to receive half of my benefits?
Answer: A minor child can receive up to half of a retirement-aged parents Social Security benefit. Child benefits typically end when the child turns 18, or up to 19 if the child is still a full-time high school student. If your child turns 18 during her senior year, for example, the benefits would stop when she graduates. If she turned 19 during her senior year, the benefits would end then.
Spousal benefits can begin as early as age 62, but the amount would be permanently reduced if started before the spouses full retirement age . Technically a spouse does not have to wait until child benefits stop before applying, but there is a limit to the total amount a family can receive based on one persons work record. The amount varies from 150% to 180% of the workers full retirement benefit.
Making The Most Of A Giant Cola
Many seniors rely on Social Security for the bulk of their income. And for some seniors, Social Security is the only income source they’re privy to.
While seniors may be getting a nice boost for 2022, Social Security beneficiaries may not come out all that far ahead between rising Medicare premiums and living costs. But still, a sizable raise is better than a minimal one, so those in line for higher benefits in 2022 should put that money to good use — especially since we may not see another COLA like this for many, many years.
Make Payments To The Federal Government
Learn how to use Pay.gov to make secure, electronic payments to government agencies from your checking or savings account. You can use the online service for VA medical care copayments, U.S. district court tickets, U.S. Coast Guard merchant mariner user fee payments, and more.
If you need help, contact Pay.gov customer service.
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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.
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, then your Social Security benefits may be temporarily reduced. The reduction is $1 for every $2 of earned income over $18,960 . During the year when you reach your FRA, your benefits will be reduced by $1 for every $3 in income over $50,520 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.
Claim Social Security Before 70 In This Situation
The single best reason to claim Social Security well before age 70 is if your claim for benefits enables a higher earning spouse to delay their claim for benefits.
Say you’re married and you and your spouse want to retire, but you need some money from Social Security to make that happen. If your spouse earned more than you, it would make sense for you to claim your benefits and let them wait to start theirs.
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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Will My Social Security Benefits Be Reduced If I Work
A worker who claims benefits before full retirement age may run into the earnings limit, in which Social Security temporarily withholds $1 in benefits for every $2 in earnings above a certain amount in 2021, the limit is $18,960.
And though a person may need benefits to supplement low earnings, the downside of permanently reduced benefits also exists if you claim early, whether or not you exceed the earnings limit, Ms. Floyd said.
A working widow who collects a survivor benefit could also face the earnings limit. A widow can claim a survivor benefit as young as 60, though her benefit will be reduced by claiming before full retirement age. If she is working and exceeds the earnings limit, part of those reduced benefits will be withheld.
The earnings limit also applies to the spousal benefit claimed by a nonworking spouse if the other spouse is working and both are younger than full retirement age. Social Security withholds benefits on total household earnings that exceed the limit.
Withheld benefits are not lost forever, however. At the beneficiarys full retirement age, Social Security will adjust the monthly benefit upward to account for the withheld benefits. The beneficiary will continue to receive the higher payment even after she recoups the withheld benefits, which could take 12 years.