Thursday, May 19, 2022

Who Can Claim Social Security Benefits

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When is the Best Time to Start Claiming Social Security Benefits?

Some people think of retirement as a time to relax, but you might see it as an opportunity to do things you couldn’t do before, such as starting your own business. For example, you might have put off starting a business before because you were afraid you wouldn’t be generating enough income. Social Security benefits could provide enough income to let you launch your business. And if your business is successful, the income it generates could be more than enough to offset the future reduction in benefits.

Beware The Social Security Earnings Test

Bringing in too much money in earned income can cost you if you continue to work after claiming Social Security benefits early. With what is commonly known as the Social Security earnings test, you will forfeit $1 in benefits for every $2 you make over the earnings limit, which in 2021 is $18,960. Once you are past full retirement age, the earnings test disappears, and you can make as much money as you want with no impact on benefits.

Any Social Security benefits forfeited to the earnings test are not lost forever. At your full retirement age, the Social Security Administration will recalculate your benefits to take into account benefits lost to the test. For example, if you claim benefits at 62 and over the next four years lose one full years worth of benefits to the earnings test, at a full retirement age of 66 your benefits will be recomputed and increased as if you had taken benefits three years early, instead of four. That basically means the lifetime reduction in benefits would be 20% rather than 25%.

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Social Security Isnt Just For Retirement

      First created in 1935 as part of then-President Franklin D. Roosevelts New Deal, the Social Security Administration originally called the Social Security Boardsprang out of a need to assist the millions of retired or elderly Americans who had lost everything in the Great Depression. After the program was launched, it was expanded to help children, widows, and disabled people who might otherwise become destitute.

      Today, the SSA, an independent agency of the federal government, still oversees those social insurance programs, each with specific requirements that must be met to be eligible to collect benefits.

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      Other Things You Need To Know

      There are limits on how much survivors may earn while they receive benefits.

      Benefits for a widow, widower, or surviving divorced spouse may be affected by several additional factors:

      • If you remarry before you reach age 60 , you cannot receive benefits as a surviving spouse while you are married.
      • If you remarry after you reach age 60 , you will continue to qualify for benefits on your deceased spouse’s Social Security record.
      • However, if your current spouse is a Social Security beneficiary, you may want to apply for spouse’s benefits on their record. If that amount is more than your widow’s or widower’s benefit, you will receive a combination of benefits that equals the higher amount.

      • If you receive benefits as a widow, widower, or surviving divorced spouse, you can switch to your own retirement benefit as early as age 62. This assumes you are eligible for retirement benefits and your retirement rate is higher than your rate as a widow, widower, or surviving divorced spouse.
      • In many cases, a widow or widower can begin receiving one benefit at a reduced rate and then, at full retirement age, switch to the other benefit at an unreduced rate.
      • If you will also receive a pension based on work not covered by Social Security, such as government or foreign work, your Social Security benefits as a survivor may be affected.

      How Does The Social Security Administration Calculate Benefits

      How You Can Claim Social Security Benefits From Your ...

      Benefits also depend on how much money youâve earned in life. The Social Security Administration takes your highest-earning 35 years of covered wages and averages them, indexing for inflation. They give you a big fat âzeroâ for each year you donât have earnings, so people who worked for fewer than 35 years may see lower benefits.

      The Social Security Administration also makes annual Cost of Living Adjustments, even as you collect benefits. That means the retirement income you collect from Social Security has built-in protection against inflation. For many people, Social Security is the only form of retirement income they have that is directly linked to inflation. Itâs a big perk that doesnât get a lot of attention.

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      What Happens If The Deceased Received Monthly Benefits

      If the deceased was receiving Social Security benefits, you must return the benefit received for the month of death and any later months.

      For example, if the person died in July, you must return the benefits paid in August. How you return the benefits depends on how the deceased received benefits:

      • For funds received by direct deposit, contact the bank or other financial institution. Request that any funds received for the month of death or later be returned to Social Security.
      • Benefits received by check must be returned to Social Security as soon as possible. Do not cash any checks received for the month in which the person dies or later.

      Benefits For A Disabled Child

      A child under age 18 may be disabled, but we don’t need to consider the child’s disability when deciding if he or she qualifies for benefits as a dependent. The child’s benefits normally stop at age 18 unless he or she is a full-time student in an elementary or high school or is disabled.

      Children who were receiving benefits as a minor child on a parents Social Security record may be eligible to continue receiving benefits on that parents record upon reaching age 18 if they are disabled.

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      How Your Social Security Benefits Are Earned

      To be eligible for Social Security benefits in retirement, you must earn at least 40 “credits” throughout your career. You can earn as many as four credits a year, so it takes 10 years of work to qualify for Social Security.

      In 2021, you must earn $1,470 to get one Social Security work credit and $5,880 to get the maximum four credits for the year.

      Lump Sum Death Benefit

      Social Security & Divorce: Can I claim Social Security based on an ex-spouse?

      First, lets deal with the one-time payment formerly called a funeral benefit. Upon the death of a Social Security beneficiary, the Social Security Administration pays a lump-sum death payment of $255. Needless to say, the $255 one time payment doesnt quite cover the cost of a funeral. Its been stuck at that level for several years and inflation has significantly eroded its useful value.

      There are three categories of people who may receive the death payment:

    • A surviving spouse, who was residing with the deceased spouse, or
    • A surviving spouse, who was not residing with the deceased, but was receiving benefits based upon the work record of the deceased spouse, or who becomes eligible for benefits after the death of the spouse, or
    • A surviving child, who was receiving benefits based upon the work records of the deceased parent, or who becomes eligible for benefit after the death of the parent. The payment is divided evenly among all eligible children.
    • If there are no eligible survivors in either of these three categories, then no death benefit is paid.

      Even though $255 isnt a lot, who wants to pass on money thats rightfully theirs? If the eligible spouse or child is not receiving benefits at the time of death, they must apply for benefits within two years in order to receive the death payment.

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      Spouses Who Dont Qualify For Their Own Social Security

      Spouses who didnt work at a paid job or didnt earn enough credits to qualify for Social Security on their own are eligible to receive benefits starting at age 62 based on their spouses record. As with claiming benefits on your own record, your spousal benefit will be reduced if you take it before reaching your FRA. The highest spousal benefit that you can receive is half of the benefit that your spouse is entitled to at their FRA.

      While spouses get a lower benefit if they claim before reaching their own FRA, they will not get a larger spousal benefit by waiting to claim after their FRAsay, at age 70. However, a nonworking or lower-earning spouse may get a larger spousal benefit if the working spouse has some late-career, high-earning years that boost their benefits.

      Who’s The Higher Earner

      Compare the estimates for you and your spouse, and pay special attention to the difference between your estimates. The higher earner is the spouse with the larger primary insurance amounts .

      When you’re deciding who will collect first and who should wait, consider having the lower earner collect first and having the higher earner wait. Over time, the higher earner’s increases will be worth more than the lower earner’s increases.

      And if one spouse’s estimates are more than twice as high as the other’s, it might make sense for both of you eventually to collect on the same spouse’s earnings record.

      In that situation, the spouse with the lower benefits can claim first based on his or her own earnings record and apply for spousal benefits later when the spouse with the higher benefits starts to collect.

      The longer the spouse with the higher benefit waits to start collecting, the higher benefits will be for both spouses. Delaying the higher earning spouse’s benefits could also eventually increase the other spouse’s survivors benefits.

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      What About Unmarried Children

      An unmarried child of the deceased may be able to receive benefits if one of the following applies:

      • They are younger than 18 years of age or, they are up to age 19, if they are a full-time student in an elementary or secondary school.
      • They are age 18 or older with a disability that began before the age of 22.

      Early Benefits Can Still Pay Off

      Can A Spouse Claim Social Security Benefits After Death

      However, taking early benefits can still pay off despite the reduced monthly check. But youll want to be sure you budget for a reduced benefit.

      No one can predict how long youll live, but if youre facing a potentially significant reduction in life expectancy and are short of income, taking Social Security early may be appropriate, says Neiser.

      Married women are also good candidates for claiming early benefits because they are likely to outlive their husbands. Those widows then become eligible to receive the greater of either their benefit or their late husbands benefit.

      However, this scenario works only if the husband does not claim his benefits early. By not claiming early benefits, the husband effectively increases the monthly benefit his wife eventually receives. So youll want to calculate how filing early will affect your spousal benefit here.

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      Your Monthly Social Security Benefits Grow The Longer You Wait To Claim

      You can collect Social Security benefits as soon as you turn 62, but taking benefits before your full retirement age results in a permanent benefits reduction of as much as 25% to 30%, depending on your full retirement age.

      If you wait until you hit full retirement age to claim Social Security benefits, youll receive 100% of your earned benefits. Or you can keep waiting to claim your Social Security benefits all the way to age 70. There’s a big bonus to delaying your claim — your monthly Social Security benefit will grow by 8% a year until age 70. Any cost-of-living adjustments will be included, too, so you don’t forgo those by waiting.

      Waiting to claim your Social Security benefits can benefit your heirs as well. By waiting to take his benefit, a high-earning husband, for example, can ensure that his low-earning wife will receive a much higher survivor benefit in the event he dies before her. That extra income of up to 32% could make a big difference for a widow whose household is down to one Social Security benefit.

      Special Rules For People Who Are Blind Or Have Low Vision

      We consider you to be legally blind under Social Security rules if your vision cannot be corrected to better than 20/200 in your better eye or if your visual field is 20 degrees or less, even with a corrective lens. Many people who meet the legal definition of blindness still have some sight and may be able to read large print and get around without a cane or a guide dog.

      If you do not meet the legal definition of blindness, you may still qualify for disability benefits if your vision problems alone or combined with other health problems prevent you from working.

      There are a number of special rules for people who are blind that recognize the severe impact of blindness on a person’s ability to work. For example, the monthly earnings limit for people who are blind is generally higher than the limit that applies to non-blind disabled workers.

      In 2021, the monthly earnings limit is $2,190.

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      When A Family Member Dies

      We should be notified as soon as possible when a person dies. However, you cannot report a death or apply for survivors benefits online.

      If you need to report a death or apply for benefits, call 1-800-772-1213 . You can speak to a Social Security representative between 8:00 am 5:30 pm. Monday through Friday. You can also visit your local Social Security office. An appointment is not required, but if you call ahead and schedule one, it may reduce the time you spend waiting to speak to someone.

      How Your Social Security Benefits Are Calculated

      Social Security Claiming Strategies for Widowed Spouses & Divorcees

      Your Social Security benefits are based on the 35 calendar years in which you earned the most money. If you have fewer than 35 years of earnings, each year with no earnings will be factored in at zero. You can increase your Social Security benefit at any time by replacing a zero or low-income year with a higher-income year.

      There is a maximum Social Security benefit amount you can receive, though it depends on the age you retire. For someone at full retirement age in 2021, the maximum monthly benefit is $3,113. For someone filing at age 70, the maximum monthly amount is $3,895.

      You can estimate your own benefit by using Social Securitys online Retirement Estimator.

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      When Are You Planning To Claim Social Security Benefits

      Your age when you first claim Social Security also determines if you are maxing out your benefits. That’s because the benefits formula mentioned above is used to determine what you’d get at a designated full retirement age, which will be between 66 and 4 months and 67 starting in 2022.

      Benefits can be claimed between ages 62 and 70, but if you hope to get that maximum check mentioned about, you’re going to have to wait to claim until 70. Late filers get delayed retirement credits that boost their standard benefit to the highest level.

      If you haven’t earned the inflation-adjusted equivalent of $147,000 for 35 years, you aren’t going to in the future, and you aren’t going to wait until 70 to claim Social Security, you aren’t on track for the max benefit in 2022.

      You can still take steps to try to increase your Social Security checks, though, such as by waiting as long as possible to claim them and making sure you get your highest earnings possible in those 35 years that count when your benefit is set.

      When Is The Best Time To Claim On Your Ex

      When to claim depends on how long you think youll live. If you are generally healthy and active or have relatives who have lived a long time, youll probably want to plan for 20, 25, 30, or more years in retirement. With Social Security, the longer you wait to claim, the larger the amount of monthly payments youll generally receive on your own work record. However, your benefit as an ex-spouse will not get any larger than half your exs PIA. And, that is only if you wait until your FRA to claim.

      Lets look at an example: Clair and her ex were married for 17 years, from 1975 to 1992. She worked and qualifies for her own Social Security benefits. Now, at age 64 , Clair is thinking about retirement and wants to know when she should claim, on whose record, and how much she would receive in monthly benefits under each scenario.

      Clair claims at 64
      $1,320/mo.
      For illustrative purposes only.

      If Clair claims at 64, she locks in a permanent reduction of her monthly benefits. If she waits till 70, shell get a higher amount, but would have to use other assets to pay her retirement expenses between now and age 70.

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      Working Before Full Retirement Age Could Mean Temporarily Forfeiting Some Benefits

      Now, if you haven’t reached your full retirement age yet, the rules get a little more complicated with regards to whether you can work while collecting benefits. See, you can work, but if you earn too much, you could find yourself temporarily losing some Social Security checks.

      The amount you can earn before your paychecks become a problem will depend if you’re going to hit FRA at some time during the year or not. That’s because different income thresholds apply before you begin to lose benefits, and you lose benefits at a higher rate if you’re younger.

      This is how the rules work:

      • If you’ll hit FRA at some point during the year, you can earn up to $50,520 in 2021 or $51,960 in 2022 and won’t lose any benefits. You’ll lose $1 in benefits for each $3 extra you earn.
      • If you won’t hit FRA during the year, you can earn up to $18,960 in 2021 and $19,560 in 2022 before you begin losing benefits. You lose $1 in benefits for each extra $2 earned.

      The Social Security Administration actually withholds entire checks when you forfeit benefits, so you don’t just lose a little from each month’s payment. If you end up forfeiting $3,000 in Social Security due to excess earnings and your checks are $1,500 per month, you’d miss out on two entire months of benefits.

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