When dealing with Social Security there are countless laws, rules, and regulations that people need to be aware. As everyone’s situation is different and in some cases couples classification, may be in question. An example of this is when a same-sex couple weds in a state that recognizes the union and live in a state that does not. In these instances and many others, it pays to know the in’s and out’s of Social Security. Here are a few tips to help navigate Social Security easier and maybe sidestep some of the complex issues at hand.
One of the first issues that you may need to be aware of with regards to Social Security is spousal benefits. These are benefits that are paid to a spouse based on the other spouse. In order for this technique to work it best, one spouse made significantly more than the other spouse did spouse or one that worked for an entity that did not pay into the Social Security system. If a high wage earning spouse is going to receive about $2,400 in benefits at full requirement age a spouse, who is also at full retirement age, should receive $1,200 a month. This is regardless of how much the second spouse is entitled to through their contributions. In order to claim a spousal benefit, you must have been married at least a year. However, it is not always the spousal benefits that will be paid. The key for this strategy to work is when both recipients reach their full retirement age. If a spouse claims their benefits early they, will receive their entitlement and not a spousal benefit. Also, benefits are reduced about 6% for each year that benefits are claimed prior to their full retirement age.
By delaying your payment from age 66 to age 70, you can increase your benefits by 8% a year or 32% if the full four years are delayed. Despite the fact, people can claim their benefits as early as age 62 could reduce your benefits by 25% or more. If at all possible you can now see the benefits of delaying a payment until later in life. The downside is that if you delay your payments and you die then the higher payments will not mean as much. But your spouse’s death benefits will be higher because the payments were delayed. Regardless of when you decide to have your benefits payments start, make sure you sign up for Medicare at age 65 to avoid higher premiums that will last for life.
Social Security does pay a one-time death benefit of $255 if you were living with the now deceased at the time of their death. But the surviving spouse may also be eligible for a survivor benefit of up to 100% of the deceased’s retirement benefit. In order for this to be the case, the marriage must have lasted at least nine months prior to the one spouse’s death. The surviving spouse can claim survivor’s benefits as early as age 60, 50 in the event they are disabled. As with regular benefits, the survivor will get more the longer they delay taking the payments ideally until their full retirement age. However, if the surviving spouse remarries prior to age 60, they will lose the survivor’s benefits.
A tactic that is somewhat complicated is to have the higher wage earner to claim their benefits then suspend them until a later age. By doing this, the one spouse can claim their benefits while the other is delayed and growing at 8% a year until age 70. This strategy works best for couples in which one’s benefit is over three times that of the other. If the spouse that claimed early outlives the other spouse, they will still benefit from the higher survivor’s benefits.
If you were married more than ten years and divorced for at least two, you are entitled to spousal benefits. These are benefits that are paid to a divorced person based on the ex-spouse’s earnings record. If you remarry, you will no longer be eligible for these benefits. By claiming these benefits, it will have no affect on your ex-spouse or their new spouse’s benefits.
If you make a claim prior to reaching your full retirement age, there are some consequences that are imposed. In 2015, for every $2 earned over $15,720 Social Security will withhold $1 of benefits. But this withholding is not a permanent reduction of your benefits as when you reach your full retirement age these withheld funds will be credited to your benefits. And once you reach your full retirement age you have no income limitations imposed on you.
A that is good for someone who has an emergency and is in need of a substantial sum of money can ask for a lump sum payment in two situations. In the first you can ask for up to six months of payments provided you are past your full retirement age. In the second instance, you filed and suspended your payments and have not started receiving any benefits yet. In this case, you can ask from your full retirement age up to the age of your request and receive a lump sum payment. But by doing this you will reduce your benefit accordingly.
Social Security is a simple concept that is very complicated when it comes to engaging your benefits. To ensure you maximize your benefits consult an expert or seek out a financial advisor that is very knowledgeable with regards to Social Security. If you have any questions, please feel free to contact me.