Hiltzik: Young People Need To Fight For Social Security Now More Than Ever
Republicans keep coming up with ways to destroy Social Security. Dont let it happen.
Thats why some version of retirement may be available to you even if you havent socked away much for your dotage. Many of us havent according to the Federal Reserve, in 2019 half of Americans ages 55 to 64 had $134,000 or less in retirement savings. Thats not exactly Lotto riches.
The Times consulted two dozen researchers, financial planners and counselors about how to tell when youre ready for retirement. Here are their tips and insights.
What To Do: Wait Longer Before Claiming Benefits
As much as you might like to quit your job the day you’re eligible for Social Security, that might not be the best move financially. If you’re in good health and expect to live a long retirement, waiting to maximize your benefits could be crucial in your later years.
If you can wait past full retirement age, your benefits could increase by as much as 8% per year you wait — up to age 70.
Paying Taxes On Your Benefits
Some people have to pay taxes on their retirement benefits when they have other, substantial income. This other income can come from wages from a job , interest, dividends, and other sources. Depending on how much income you have, you could have to pay taxes on up to 85% of benefits. To learn more about this, read Income Taxes and Your Social Security Benefit on the SSA website.
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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.
In 2022, the average monthly premium for Part D will be $33 per month versus $31.47 in 2021. If you enroll in a Medicare Advantage plan, the average monthly premium will be $19 per month in 2022 versus $21.22 in 2021. However, if you are still receiving health insurance from your or your spouses employer, you might not yet have to enroll in Medicare.
As of Dec. 26, 2021, Social Security offices 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.
An Example Of Taxed Benefits
Lets say you receive the maximum Social Security benefit for a worker retiring at FRA in 2021: $3,148 per month. Your spouse receives half as much, or $1,574 a month. Together, you receive $4,722 a month, or $56,664 per year. Half of that, or $28,332, counts toward your combined income for determining whether you have to pay tax on part of your Social Security benefits. Lets further assume that you dont have any nontaxable interest, wages, or other income except for your traditional individual retirement accounts required minimum distribution of $10,000 for the year.
Your combined income would be $38,332half of your Social Security income, plus your IRA distributionwhich would make up to 50% of your Social Security benefits taxable because youve exceeded the $32,000 threshold. Now, you may be thinking, 50% of $56,664 is $28,332, and Im in the 12% tax bracket, so the tax on my Social Security benefits will be $3,399.84.
Fortunately, the calculation takes other factors into account, and your tax would be a mere $225. You can read all about the taxation of Social Security benefits in Internal Revenue Service Publication 915.
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The Mistake: Not Working Long Enough
To qualify for Social Security retirement benefits, you need at least 40 work credits. You can earn up to four credits each year based on your earnings. For 2019, you must earn $1,360 to get one credit, or $5,440 to get the maximum of four credits.
In addition, your benefits are calculated based on the average of your 35 highest-earning years. If you have fewer than 35 years of earnings, $0 will be averaged in for each year you don’t have earnings.
What To Do: Create A Well
Social Security can be a great supplement to other sources of retirement income, but it should not be your only source. Make sure you have a healthy nest egg saved in a 401 or IRA, and ideally set yourself up to have passive income streams that will continue to pay out in your post-9-to-5 life.
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Other Ways Creditors Can Collect Payments
If Social Security benefits are your only source of income, private creditors and debt collectors have limited options to get their money. They cant garnish your Social Security income and they cant levy your bank account as long as it only contains Social Security income that was put there via direct deposit.
But if you owe a substantial amount of debt, companies may not give up easily on attempting to collect. Just because Social Security makes up your only source of income doesnt mean that creditors and debt collectors dont have other means to try to recuperate the money you owe them.
Companies may opt to take other actions if they cant access your Social Security funds to collect a debt. These actions might include:
Can I Retire At 62 With 300k
Asked by: Ariel Hermiston
Can I Retire at 62 with 300k? In short, it’s possible, but, first, you’ll need to know how much pension and other passive income you’ll be getting. Once you add all your passive income sources, and your pension, you can then work with a financial advisor to come up with an appropriate withdrawal rate for your 300k.
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How Much Retirement Should I Have At 50
If you are earning $50,000 by age 30, you should have $50,000 banked for retirement. By age 40, you should have three times your annual salary. By age 50, six times your salary by age 60, eight times and by age 67, 10 times. 8 If you reach 67 years old and are earning $75,000 per year, you should have $750,000 saved.
Can I Retire At 55 And Collect Social Security
So can you retire at 55 and collect Social Security? The answer, unfortunately, is no. The earliest age to begin drawing Social Security retirement benefits is 62. … Once you turn 62, you could claim Social Security retirement benefits but your earnings from consulting work could affect how much you collect.
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The Mistake: Waiting Until 70 To Collect Spousal Benefits
Delaying your benefits beyond full retirement age will only qualify you for delayed retirement credits if you are the primary beneficiary. Social Security benefits you receive as a spouse do not include delayed retirement credits, so there is no incentive to delay collecting Social Security past your full retirement age. If you wait, you’ll have missed out on years you could have been collecting.
Applying For Social Security
- Generally, you should apply for Social Security retirement benefits three months before you want your benefits to begin. Even if you dont plan to receive benefits right away, you should still sign up for Medicare three months before you reach age 65.
- If you were born before 1938 and you meet all other requirements, you can receive benefits beginning with the first full month you are age 62. However, if you choose to begin receiving benefits before age 65, your benefits will be reduced to account for the longer period over which you will be paid.
- The full retirement age is 65 for persons born before 1938. The age gradually rises until it reaches 67 for persons born in 1960 or later. Social Security benefits are payable at full retirement age for anyone with enough Social Security credits. As you work and pay taxes, you earn credits that count towards eligibility for future Social Security benefits. You can earn a maximum of four credits each year. Most people need 40 credits to qualify for benefits. People who delay retirement beyond full retirement age get special credit for each month they dont receive a benefit until they reach age 70.
- To find out what your retirement age is, use the Social Security Retirement Age Chart at www.ssa.gov
- You should speak with a Social Security representative in the year before you plan to retire. It may be to your advantage to start receiving your retirement benefits before you actually stop working.
ave questions? Call at 874-4618.
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Can I Switch My Social Security Benefit To A Spousal Benefit
Social Security benefits can provide you with a stream of retirement income that is reliable. Deciding when to take benefits is an important question, especially if youre married and hope to qualify for spousal benefits. If youre already taking Social Security, you might be wondering if its possible to switch to a spousal benefit later. The answer depends on whether your spouse is receiving Social Security benefits yet.
A financial advisor can help you figure out what you qualify for and when the best time is for you to start taking benefits as part of your full retirement plan.
How Do Social Security Spousal Benefits Work?
Calculating Social Security benefits as a married couple is a bit different than doing it as a single person. When someone files for Social Security benefits, their spouse may be able to claim a spousal benefit. The benefit is based on their spouses contributions to Social Security and is capped at 50% of their benefit amount at full retirement age. For example, if they were to receive $2,200 per month at full retirement age, their spousal benefit would max out at $1,100 per month.
In order to receive spousal Social Security benefits, you must:
Be at least 62, the earliest age at which you can receive Social Security benefits OR
Be a caretaker for a child under age 16 or a child whos receiving Social Security disability benefits
Be married for at least one year to someone who has filed for their retirement benefits
Deemed Filing and Spousal Benefits
The Mistake: Not Checking Your Earnings Record
Even if you’re decades away from claiming Social Security, you could be making a big mistake if you don’t keep track of your yearly earnings. The amount of Social Security benefits you receive depends on your earnings record, so if that record is incorrect, you might not receive the benefits you’re entitled to.
Errors can occur for a variety of reasons, including an employer reporting an incorrect amount of earnings or your earnings not showing up because you got married or divorced and your name change has not been processed correctly.
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I Have Some Savings Should I Live On That Rather Than Claim Social Security Now
This is a very personal decision that depends greatly on your circumstances. Maintaining an emergency fund is always important, and never more so than during times of economic volatility. But people with very substantial savings can draw down safely to cover living expenses while delaying their claim.
The loss of earned income means you will be in a lower tax bracket, and rates are at historically low levels under the Tax Cuts and Jobs Act of 2017.
Theres no better time to take money out of a 401 or I.R.A. than when your income is relatively low and you have a lower marginal tax rate, Mr. Finke said.
A delay of just a few years can be very beneficial. A 62-year-old with a full retirement age benefit of $1,500 would increase her likely lifetime benefits by more than $100,000 by waiting until that point to file, according to a projection by William Meyer, a co-founder of Social Security Solutions, which offers software aimed at helping retirees make optimal claiming decisions. Mr. Meyers calculation assumes that our retiree lives to 90 and that Social Securitys cost-of-living adjustment is 2 percent each year.
But the pandemic has added a new dimension to claiming decisions for most retirees, the retirement researcher Dirk Cotton said. Since most Americans have modest savings, if any, many of them will need to hang on to what they have.
Persistent bear market conditions also present an argument in favor of an early claim, Mr. Cotton added.
How Does Full Retirement Age Affect Your Social Security 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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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.
Check The Status Of Your Social Security Benefits Now
Social Security benefits are designed to replace roughly 40% of your income, calculated by taking the average of your monthly earnings over your most lucrative 35 working years and adjusting for inflation.
The amount you receive fluctuates depending on when you claim your benefits. For those born in 1960 or later, full retirement age is currently 67. You can elect to receive benefits as early as 62, but retiring early could result in a ding of up to 30% in the amount of your benefit.
If you delay retirement past your full retirement age, you’ll receive an 8% annual boost to your payout until your benefit maxes out at 70.
Depending on your financial situation, it can make sense to take Social Security earlier or later. But regardless of when you retire, it’s key to ensure that you’re getting the maximum benefit that you qualify for. And that means making sure the Social Security Administration has your numbers straight now.
“Make sure you’re getting all of your years counted,” says Foulks. “Every year, I check my earnings record to make sure they’re appropriately counting my income.”
The earnings listed for a given year should match your total pre-tax income. Mistakes might arise if you changed jobs or started working partway through the year, Foulks says.
In other words, stay on top of this now, or you could find yourself having to dig up 20-year-old W-2s somewhere down the line.
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It Can Be A Helpful Exercise To Calculate Your Social Security Benefits In A Variety Of Scenarios
Most retirees end up waiting until what is called their full retirement age of 66 or 67, or even later, before claiming Social Security benefits. But you can actually start claiming them as early as the age of 62 if you feel like you are in a position where it makes sense.
When making this choice, you should think long and hard about where you’re at in life from a financial perspective, and also understand how your health is doing. The goal is to maximize the value of your Social Security benefits into retirement for as long as possible.
A helpful exercise can be to figure out how much Social Security you would qualify for at certain ages and annual incomes, which will help you decide on whether to take Social Security early or wait for your FRA. Let’s take a look at what your Social Security benefits would be if you retired at age 62 and earned the 2022 equivalent of $60,000 in annual income on average over your career.
Image source: Getty Images.