As a Registered Social Security Analyst and a Registered Financial Consultant, I know that for many people approaching retirement Social Security is a major issue and concern. For those of you who have already started collecting your benefits, things are what they are for you. But for those who have not started collecting your benefits, there are some tips that you may find interesting. The key is to have a qualified individual assist you in creating the best possible Social Security strategy for your unique situation.
Key Ages
First, you need to be aware of the basics of how the system works if you are an individual. Provided you have your work experience and have met the qualifications to collect benefits. There are three essential ages you need to be aware of. The first is age 62, and that is the first opportunity that is available to you to collect a reduced benefit. At this age, you can expect approximately 30% less than you would expect at your full retirement age. Then for those born before 1954, your full retirement age is 66, and for those born after 1960, your full retirement age would be 67. At these ages, you will be eligible to collect your full retirement benefits with no deductions. Then there is age 70, which is the age that benefits will stop accruing. As a bonus for delaying your benefits, you will receive an extra 8% per year from your full retirement age to age 70, not a bad return on your investment for delaying your benefits.
But then there is the question as to when to file with Social Security to start collecting your benefits. For many, they opt to retire at the first opportunity that they have due to a variety of reasons, mainly health. But regardless of your situation, we all want to collect the most that we can from the system we have all contributed to over our working career. But the Social Security Administration knows what they are doing, and they have it down to a pretty good guess as to your life expectancy. And the simple math suggests that you have to live past the age of 80 to “beat” the benefits system. If you managed to live past the age of 80 and waited until your full retirement age or the maximum age of 70, you will most likely come out ahead in the numbers game when it comes to your benefits. Here you need to consider your overall health, the health of your parents, and their longevity as well. If you are healthy and your parents were healthy and lived long lives, it may pay off for you to wait until age 70 to start collecting your benefits.
Spousal Concerns
If you are married and your spouse did not work for a full 35 years, or maybe they did but earned considerably less than the other spouse, there are some options as well. First, no matter the work record of the spouse who did not earn as much, they are eligible for spousal benefits based on the other spouse’s work record. The basics of the spousal benefits are that they will be half of the benefits of the higher-earning spouse. And like regular benefits, if a spouse elects to collect their benefits from age 62 to their full retirement age, the benefits will be reduced. Then when the higher-earning spouse dies, the surviving spouse will collect 100% of the higher benefit for the remainder of their life.
If the higher-earning spouse is still working or as a coupe, your can afford to delay their benefit until age 70 that would aid the lower benefit spouse as their benefit would be based then on the higher benefit. And at age 70, there is an extra 8% per year that the benefits are delayed, thereby increasing the spouse’s survivor benefits. Again, your projected life longevity plays an essential role in making these decisions, and professionals can assist you in making the best Social Security elections that will benefit your unique situation.
What if I am divorced?
For those who were married for ten years and have been divorced for at least two years, you may collect benefits when your ex-spouse reaches age 62. Here it is to your benefit to keep working and delay taking your benefits as long as you can. As your Social Security benefits are based on your highest 35 years of employment, working an extra few years can make a difference in your benefits. And again, if you can wait until age 70, you can increase your benefit that extra 8% per year until age 70 that is beyond your full retirement age. The more zeros you can fill in, and the lower-earning years you can replace, the better off you will be in the long run in any instance.
What if your spouse dies?
For those whose spouse is deceased, you may collect benefits at age 50 if you are disabled and age 60 otherwise. This benefit will be based on your deceased spouse’s work record at the time of their death. But just because you are eligible to receive these benefits at age 60 does not mean that you should. If you elect to wait until your full retirement age, you will receive the same amount that your spouse was receiving before their death. And if they were not receiving their benefits, you would be eligible to receive what they would have been eligible for at the time of their passing. And yes, this would include any delayed extras that they would have received if they were between their full retirement age and age 70.
Benefits before Full Retirement Age and going back to work
If you do elect to take your benefits before your full retirement age and elect to work still, there are some key things you should be aware of. First, in 2020 if you earn over $18,240 for ever $2 over this amount, your benefits will be reduced by $1. Meaning you cannot hold a meaningful job if you start your benefits early and continue to work in a meaningful way. But for each month that you do not collect a Social Security check due to this provision, you will have those months added back to your work record when you reach your full retirement age. This means that if you earned enough to wipe out 12-months of benefits and you started collecting Social Security at age 62, and your full retirement age is 67, they would recalculate your starting age of collecting benefits to be age 63, not age 62.
Social Security plays a critical role in most of our retirement planning, and it is something that needs to be understood to the best of your ability before collecting any benefits. For assistance, seek out the help of a Registered Social Security Analyst or a Registered Financial Consultant. And as always, if you have any questions, feel free to contact me directly or leave a comment on the site. And to join our email newsletter, please fill out the form below.
