Claiming Social Security At Age 65
Those whose Full Retirement Age is 65 are already that age or older. For those born after 1955 and before 1960, Full Retirement Age is 66 and some months. By retiring at age 65, those beneficiaries lose at least 12 months worth of increases. For those born in 1960 or after, Full Retirement Age is 67, so they lose up to 24 months of increases if they retire at age 65.
Below, we show how a person born in 1960 and entitled to a full benefit of $2,500 could see his or her monthly benefit change based on claiming age:
You Can Receive Benefits Before Your Full Retirement Age
You can start receiving your Social Security retirement benefits as early as age 62, but the benefit amount will be lower than your full retirement benefit amount.
If you start receiving your benefits before your full retirement age, we will reduce your benefits based on the number of months you receive benefits before you reach your full retirement age.
If you wait until age 70 to start your benefits, your benefit amount will be higher because you will receive delayed retirement credits for each month you delay filing for benefits. There is no additional benefit increase after you reach age 70, even if you continue to delay starting benefits.
Retirement Income Benefits For Qualified Family Members
Even if your spouse has never worked outside your home or in a job covered by Social Security, he or she may be eligible for spousal benefits based on your Social Security earnings record. Other members of your family may also be eligible. Retirement benefits are generally paid to family members who relied on your income for financial support. If you’re receiving retirement benefits, the members of your family who may be eligible for family benefits include:
- Your spouse age 62 or older, if married at least one year
- Your former spouse age 62 or older, if you were married at least 10 years
- Your spouse or former spouse at any age, if caring for your child who is under age 16 or disabled
- Your children under age 18, if unmarried
- Your children under age 19, if full-time students or disabled
- Your children older than 18, if severely disabled
Your eligible family members will receive a monthly benefit that is as much as 50 percent of your benefit. However, the amount that can be paid each month to a family is limited. The total benefit that your family can receive based on your earnings record is about 150 to 180 percent of your full retirement benefit amount. If the total family benefit exceeds this limit, each family member’s benefit will be reduced proportionately. Your benefit won’t be affected.
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How The Full Retirement Age Affects Social Security
FRA also affects the Social Security program as a whole. Americans are living longer and the working-age population is shrinking. Some have proposed raising the FRA to 70, based on predictions that the Social Security reserve fund could run out of money by 2034.
Even if the reserve fund is depleted, however, future retirees should expect to get something from Social Security. Social Security income is taxable, which generates revenue. Plus, the Social Security program gets funding from the interest generated by trust funds. So future retirees will likely receive around 75% of every dollar that they currently contribute to the program.
How Are Your Social Security Benefits Calculated
Social Security uses your highest 35 years of earnings, indexed to a national average wage index, to calculate your primary insurance amount If you have fewer than 35 years of earnings, each year with no earnings will be entered as 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 2022, the maximum monthly benefit is $3,345. For someone filing at age 70, the maximum monthly amount is $4,194. And for someone retiring early, at age 62, the maximum monthly benefit is $2,364.
To estimate your benefits, use the Social Securitys online Retirement Estimator.
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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.
Your Earnings Record Affects Your Social Security Payout
The Social Security Administration only uses your top 35 earnings years to calculate your retirement benefits. As you approach retirement, it’s a great opportunity to maximize your earnings and replace lower-earning years with higher-earning ones in your Social Security work record.
As the years right before retirement are often your peak earning years, it’s a great time to raise your future payout. If you haven’t yet worked for 35 years, this is your chance to put in enough years so that your Social Security earnings record is full.
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Why It Pays To File For Social Security At Fra
When you claim Social Security ahead of FRA, your benefits get reduced. And filing at age 62 means slashing your benefits by 25% to 30%, depending on your FRA. That’s a risky thing, because if you end up depleting your nest egg faster than expected, or your retirement living costs end up being higher than expected, you might need more income from Social Security to help compensate.
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Similarly, there’s a risk in delaying your filing beyond FRA — that you won’t end up living a long enough life for that to be your best financial move. See, delaying your claim will result in a higher monthly benefit. It won’t necessarily score you a higher lifetime benefit, though. To get that, you’ll generally need to live a pretty long life, and if you pass away in your 70s, delaying your filing will generally mean ending up with less Social Security income all in.
That’s why filing for benefits at FRA may be your safest bet. That way, your benefits aren’t reduced, but you also don’t have to wait too long to collect them. If you end up with health issues that shorten your life expectancy, you can at least take comfort in the fact that you didn’t wait too long to first start receiving your benefits.
Social Security Limits How Much You Can Earn Without Losing Benefits
If you are collecting Social Security and you unretire, you could be affected by the earnings limit. This rule applies to those who havent reached full retirement age, are collecting Social Security, and earn more by working than a limit set annually by the Social Security Administration.
In 2022, that limit is $19,560 for those who are under their full retirement age for the entire year. Social Security will deduct $1 from your benefit payments for every $2 you earn above the annual limit.
The rules change in the year you reach full retirement age. Social Security deducts $1 in benefits for every $3 earned above a different limit. In 2022, that limit is $51,960, and it applies only to the months up to the month you reach full retirement age.
The earnings limit applies to self-employment, too.
Social Security has a calculator to help individuals evaluate how their benefits could be affected by working. Its important to note that the earnings limits and exemption amounts are updated annually, so keep a close eye on those if youre considering unretiring.
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Claim Social Security Too Early There Are Still Ways To Increase Your Income
Seniors elect to claim benefits early for a variety of reasons, ranging from needing the income immediately to wanting to invest the money for a bigger long-term payoff. But sometimes they come to regret the decision.
If you feel like you claimed Social Security too early, there are ways to increase your income to help pay unforeseen bills or finance a lifestyle change. Three options as outlined by The Motley Fool follow.
Before You Make Your Decision
There are advantages and disadvantages to taking your benefit before your full retirement age. The advantage is that you collect benefits for a longer period of time. The disadvantage is your benefit will be reduced. Each person’s situation is different. It is important to remember:
- If you delay your benefits until after full retirement age, you will be eligible for delayed retirement credits that would increase your monthly benefit.
- That there are other things to consider when making the decision about when to begin receiving your retirement benefits.
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Why Did The Full Retirement Age Change
Full retirement age, also called “normal retirement age,” was 65 for many years. In 1983, Congress passed a law to gradually raise the age because people are living longer and are generally healthier in older age.
The law raised the full retirement age beginning with people born in 1938 or later. The retirement age gradually increases by a few months for every birth year, until it reaches 67 for people born in 1960 and later.
Full Retirement Age: Age 6567 Depending On Date Of Birth
Your full retirement age is determined by your day and year of birth, and it is the age in which you get your full amount of Social Security benefits. For every year you delay taking your benefits from full retirement age up until you turn 70, your benefit amount will increase by almost 8% a year. It is referred to as a delayed retirement credit. This increase can result in more lifetime income for you and your spouse. Even after factoring in a potential return on investment and the monthly benefits you could have received if you claimed early, there can still be a $50,000$100,000 increase in lifetime benefits by waiting until you are older.
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How Does The Social Security Administration Calculate Benefits
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.
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, 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, you may have to pay tax on up to 85% of your benefits.
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So Does When You File
Your earnings record is one of the two main factors in determining the size of your Social Security payout. The other is the age at which you file.
You can claim Social Security retirement benefits as early as age 62, but your monthly benefit will be permanently reduced by 30%. If you wait to file until age 70, on the other hand, your Social Security checks will see an 8% annual boost from age 67 to age 70, or 24% in total.
When compared with what you’ll draw if you file at age 62, filing at age 70 amounts to a roughly 77% jump in monthly benefits.
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.
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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.
Delaying Retirement Will Increase Your Benefit
For each month that you delay receiving Social Security retirement benefits past your full retirement age, your benefit will increase by a certain percentage. This percentage varies depending on your year of birth. For example, if you were born in 1943 or later, your benefit will increase 8 percent for each year that you delay receiving benefits, up until age 70. In addition, working past your full retirement age has another benefit: It allows you to add years of earnings to your Social Security record. As a result, you may receive a higher benefit when you do retire, especially if your earnings are higher than in previous years.
Should I Apply For Medicare
Remember, Medicare usually starts when you reach age 65.
If you decide to delay starting your benefits past age 65, be sure to go online and file for Medicare.
You will need to apply for Original Medicare three months before you turn age 65. If you dont sign up for Medicare Part B when youre first eligible at age 65, you may have to pay a late enrollment penalty for as long as you have Medicare coverage.
Even if you have health insurance through a current or former employer or as part of your severance package, you should contact them to find out if you need to sign up for Medicare. Some health insurance plans change automatically at age 65.
Please read the general and special enrollment period information in our Medicare booklet to find out what may happen if you delay.
When you start receiving Social Security retirement benefits, some members of your family also qualify to receive benefits on your record.
If they qualify, your spouse or child may receive a monthly payment of up to one-half of your full retirement benefit amount. These payments will not decrease your retirement benefit.