Benefits May Be Taxable
You will have to pay taxes on your benefits if you file a federal tax return as an individual and your total income is more than $25,000. If you file a joint return and you and your spouse make more than $32,000 jointly, you will have to pay taxes on your benefits. For more information, call the Internal Revenue Service at 800-829-3676.
Your Spouse Should Factor Into When You Collect Benefits
Its important to know that the decision to claim Social Security benefits has implications for your spouse too. Many people make these decisions in isolation, says Rita Cheng, CEO of Blue Ocean Global Wealth in Rockville, Maryland. They dont think of income streams together.
For starters, widows and surviving divorced spouses whose marriages lasted 10 years or more are eligible for survivor benefits. So, waiting until age 70 to claim Social Security benefits also increases your spouses survivor benefits. Most spouses dont even realize they get a survivors benefit, says Dan Mathews, a certified financial planner with Creative Planning in Leawood, Kansas. You can find more about how survivors benefits are calculated by using the SSAs Survivors Planner.
In addition, spouses who never worked or have low earnings can get up to half of their retired spouses full benefit. For those who are eligible for both personal retirement benefits and spousal benefits, the SSA always pays personal benefits first. If your benefits as a spouse are higher than your personal retirement benefits, youll get a combination of benefits that equals the higher spousal amount, the Social Security Administration says.
Consider the example below, courtesy of the SSA:
What If I Delay Taking My Benefits
If you retire sometime between your full retirement age and age 70, you typically earn a “delayed retirement” credit for your own benefits . For example, say you were born in 1960, and your full retirement age is 67. If you start your benefits at age 69, you would receive a credit of 8% per year multiplied by two . This means your benefit would be 16% higher than the amount you would have received at age 67.
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Should You Take Social Security At Full Retirement Age
There are tons of factors to consider in deciding when to start your Social Security benefits.
For people with serious health problems, it might make sense to start benefits early. Someone who was disabled before full retirement age and can no longer work might consider forgoing a higher monthly benefit to start collecting monthly Social Security benefits immediately. Meanwhile, maximizing Social Security benefits is a strategy thats most relevant for people who expect to live longer than average.
Consider a hypothetical beneficiary who lives to 79, which is the average American life expectancy:
If they started collecting Social Security at age 62, with a $1,400 monthly payment, they would receive a lifetime total of $285,600 in benefits.
If they waited until their full retirement age, theyd receive a $2,000 monthly benefit, for a lifetime total of $300,000.
If they waited as long as possible to claim benefitsto age 70they would get a monthly benefit of $2,600, or a lifetime total of $280,000.
For this hypothetical American, no matter when they choose to start receiving Social Security benefits, the differences in lifetime total benefits isnt very large. Deciding when to start Social Security isnt always as simple as aiming to maximize your monthly payment.
Tips For Figuring Out Your Full Retirement Age
Depending on your area of work, its likely that your employers retirement age and the Social Security Administrations full retirement age are different. The universal milestone used to be 65, but the government increased it beginning with people born in 1938 or later. The age gradually increases until it reaches 67 for individuals born after 1959.
For example, if you were born in 1955, the SSA says your full retirement age is 66 and two months. You would be able to retire from work and claim your benefits now at age 62, but you wont receive full benefits until you reach the SSAs specified retirement age.
This is important because someone born in 1955 who is eligible to receive $1,000 a month at full retirement age will only get $741 a month if they claim those benefits at age 62. Thats a 26 percent reduction just for collecting early.
Of course, some people just cant wait. Perhaps theyre in very poor health and unlikely to live long in retirement or they must collect these payments to survive and make ends meet.
If youre not sure what your full retirement age is, you can use this SSA calculator to help you figure it out.
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Full Retirement Age For Survivors Born Between 1945 And 1: 66
The earliest a widow or widower can start receiving Social Security survivors benefits based on age is age 60.
If you start receiving survivors benefits at age
- 60, you will get 71.5 percent of the monthly benefit because you will be getting benefits for an additional 72 months.
- 62, you will get 81.0 percent of the monthly benefit because you will be getting benefits for an additional 48 months.
- 65, you will get 95.3 percent of the monthly benefit because you will be getting benefits for an additional 12 months.
If you’re receiving widows, widowers, or divorced widows or widowers benefits, you can switch to your own retirement benefit as early as age 62.
Reminder: Your full retirement age for retirement benefits may not match your full retirement age for survivors benefits.
How Your Social Security Survivors Benefit is Reduced
|If you start getting benefits at age1.||The survivors benefit you will receive is reduced to2.|
Definition And Example Of Full Retirement Age
Full retirement age is the age at which you can receive full, unreduced Social Security benefits. If you collect benefits before reaching your full retirement age, those benefits are reduced.
- Alternate name: Normal retirement age
For example, if you start collecting benefits at age 62, the earliest age at which you can collect, you could see up to 30% reduction in full benefits. If you delay benefits until after your full retirement age, your benefits are increased thanks to delayed retirement credits. These credits can increase your benefits by up to 8%.
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Born In 1955 Or Later You May Have To Work Until Youre 67
Once upon a time, turning 65 years old meant you could get your full Social Security retirement benefits and Medicare coverage at the same time. But over the last couple of years, the Social Security Administration changed the full retirement age twice first to age 66 for people born from 1948 to 1954, then again to age 67 for people born in 1955 or later.
No matter what full retirement age is required for you to get full Social Security benefits , Medicare eligibility still begins at age 65.1Retirement age by year of birth
|Year of birth|
66 years and 2 months
66 years and 4 months
66 years and 6 months
66 years and 8 months
66 years and 10 months
Claiming Social Security After Your Full Retirement Age Increases Benefits
You can also wait as late as age 70 to start collecting Social Security benefits. Doing so boosts your retirement benefits. Theres no incentive to wait after age 70 to claim Social Security.
Heres how your benefit will increase if you wait to claim Social Security:
- If you delay claiming until age 68, your benefit will increase by 8%
- If you delay claiming until age 69, your benefit will increase by 16%
- If you delay claiming Social Security until age 70, your benefit will increase by 24%
Using this example, if you were eligible for a Social Security retirement benefit of $1,000 per month at your full retirement age of 67, the benefit would increase to $1,080 if you delay claiming until age 68 $1,160 if you delay to age 69 and $1,240 if you delay to age 70.
Once again, the delayed retirement credits accrue monthly, not annually, so every month you wait beyond age 67 will net you a slightly bigger monthly check from Social Security.
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How Does My Retirement Age Affect My Medicare Benefits
You can generally still get Medicare benefits at age 65 even if you havenât reached your SSA retirement age.
You typically donât need to apply for Social Security benefits to get your Medicare coverage. Read about how to apply for Medicare.
As you plan for retirement, you may be thinking about what type of Medicare coverage you want. You can start comparing plans today â just enter your zip code in the box on this page.
Did you know that with Original Medicare there is no limit to how much you spend out of pocket each year? eHealth can help you find coverage that puts a yearly cap on your spending!
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What If I Delay Claiming My Benefits After My Full Retirement Age
You can also delay receiving your benefits to after your full retirement age. For each year you delay up to age 70 you receive delayed credits. These credits are worth an additional increase in your benefits of 8% per year. You can delay up to age 70. However, after age 70 you will not receive any additional delayed credits so you definitely should claim your benefits by age 70. If your full retirement age is 67 and you wait until age 70 to claim your benefits you would receive 124% of your full retirement amount.
Your full retirement age can range between age 66 and 67. You can claim social security benefits anytime between ages 62 and 70. If you claim at age 62, you may receive as little as 70% of your full retirement age benefit. However, you will receive this reduced benefit for an additional eight years compared to waiting until age 70.
If you wait until age 70, your benefit will be 124% of your full retirement amount. This means a person who would receive $2,000 per month a full retirement age would receive $1,400 a month if they take their benefit at age 62 compared to $2,480 by waiting to age 70. The break-even point is about 12-13 years. Of course, you need to take into account your health, life expectancy and current financial situation before making this important claiming decision.
Social Security Full Retirement Age Benefits, Full Retirement Age Affects SS
How Does Working After Full Retirement Age Affect My Benefits
Continuing to work past your full retirement age, whether or not you take benefits, can potentially increase your future benefits. Thats because the Social Security administration calculates your primary insurance amount based upon your 35 highest-earning years and uses zeros for the calculation if you have worked fewer than 35 years.
Working longer replaces each of those zeroes, or even lower earning years if you have no zeros, which boosts your PIA. Its also important to note that lower-earning years after retirement will not affect your benefits since Social Security uses whichever 35 years are your highest earning.
To Wait Or Not To Wait
Consider taking benefits earlier if . . .
- You are no longer working and can’t make ends meet without your benefits.
- You are in poor health and don’t expect the surviving member of the household to make it to average life expectancy.
- You are the lower-earning spouse, and your higher-earning spouse can wait to file for a higher benefit.
Consider waiting to take benefits if . . .
- You are still working and make enough to impact the taxability of your benefits.
- Either you or your spouse are in good health and expect to exceed average life expectancy.
- You are the higher-earning spouse and want to be sure your surviving spouse receives the highest possible benefit.
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Patience Pays Off When It Comes To Collecting Social Security Benefits
Most Americans start drawing Social Security as soon as theyre eligible, not knowing that waiting could pay off for them and their spouse.
You can start receiving Social Security benefits at age 62 but waiting until age 70 will boost your benefits by as much as eight percent a year. Some people didnt realize and didnt know they could delay, says Colleen Jaconetti, senior investment strategist at mutual fund giant Vanguard Group. I dont think this option has been well publicized.
If youre helping a senior claim Social Security benefits or trying to devise your own retirement plan, consider the options carefully. It can be difficult to get a do-over if you make a mistake.
Jaconetti illustrates the significance of this decision with the example of someone born in 1960 who will reach Social Securitys full-benefit retirement age when they turn 67. If their benefit at age 67 is $1,500 a month, then their monthly check will grow to $1,860 per month if they wait to claim benefits until age 70. By contrast, claiming benefits early at age 62 will reduce their initial monthly check to only $1,050.
There is a break-even point when taking benefits at age 70 will outpace the amount taken early, but there is more to waiting than just gambling that youll live a long life. Delaying collection also means higher benefits for a surviving spousea critical issue, especially if that spouse has earned less over their lifetime.
Whats Your Social Security Break
If youre looking to maximize your total lifetime Social Security payout, youll want to conduct a break-even analysis to determine when you should start drawing your benefits.
Your break-even age occurs when the total value of higher benefits starts to exceed the total value of lower benefits .
For example, if you are eligible to collect a reduced $900 benefit at age 62 plus 1 month, and your benefit would increase to $1,251 at age 65 and 10 months, your estimated break-even age is 75 years and 5 months.
If you expect to live beyond that age, it could make financial sense to delay drawing benefits. The Social Security Administrations life expectancy calculator can help you decide.
When it comes to calculating a start date for Social Security benefits, however, theres not an age thats appropriate for everyone. Consider your own financial needs, health and other retirement plans before making the call. If you cant reasonably afford to live without taking benefits, it may make little sense to delay taking your benefit.
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What Is The Future Of Social Security
As of June 2022, the Social Security Trust Fund is projected to have enough resources to cover all promised benefits until 2035 when, absent a change from Congress, benefits would need to be cut for all current and future beneficiaries to about 80% of scheduled benefits.2 Over the longer term, changes to the full retirement age or means testingâwhich could reduce or eliminate benefits based on your other income sourcesâmay also be considered.
If you’re skeptical about the future of Social Security or wary of potential changes, you may be tempted to start benefits early, assuming that it’s better to have something than nothing. Regardless of your situation, if you are concerned about the future prospects for Social Security, then that’s a good reason to save moreâand earlierâfor your retirement.
How Is My Full Retirement Age Benefit Calculated
Your FRA benefit is calculated based on how much money youve made during your working career. The Social Security Administration uses a math formula and something they call bend points to figure out how much your benefit checks should be.
Dont worry, well walk you through all of it nice and slow. So, grab a pencil and a sheet of paperits time to do some math!
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Usa Full Retirement Date Calculator
Based on your birthday, this online calculator calculates your full retirement date, the first month you will be eligible for full Social Security retirement benefits, and the month you can apply for them.
This online calculator finds your full retirement age based on your birth year, then calculates your retirement date by adding retirement age to your birthday. Retirement age is defined based on the Full Retirement Age page on Social Security Administration site.
In short, people born before 1938 have the age of 65 years, then retirement age increases by 2 months each year up to 1943. People born between 1943 and 1954 have the age of 66 years, then again it increases by 2 months per year up to 1960 to finally become 67 years.
If you were born on the 1st of January, the year to determine your retirement age is the previous year.
You are eligible to receive full social security benefits the next month after your retirement date unless it’s the first day of the month. In this case, you are eligible for the same month. Since the Social Security Administration pays individuals a month behind, you will receive the first benefit payment yet another month later after your retirement date.
Finally, your application for benefits could take up to three months to be processed, so you’d better apply 3 months beforehand.
Full Retirement Date Calculator
Get Help From A Professional
In 2015, the government eliminated some Social Security planning strategies and loopholes that maximized benefits, but its still a good idea to ask a financial planner to assist with devising a strategy that fits a person or couples unique situation. The SSA is very technical in the way they explain things, says Mathews. You almost need a decoder ring to figure things out.
Reputable financial planners should also be able to accompany clients to the Social Security office if needed. There are a lot of little technicalities that can occur, says Julie Hall, director of financial planning for Planning Alternatives in Bloomfield Hills, Michigan. My colleagues and I have gone with clients to the Social Security Administration to make sure theyre speaking to someone knowledgeable. You want to make sure it gets done right.
To find a certified financial planner to assist with benefits strategies and retirement planning, visit www.letsmakeaplan.org. This website is maintained by the Certified Financial Planner Board of Standards , which sets rigorous ethical and professional requirements for financial-planner certification.
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