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Some of the Personal Finance content I will be writing about in this series of articles may be obvious or rudimentary to many of my readers but it also may be of great value to young people you may know. Please share this information with those you believe will best benefit from it.
When are you eligible to collect Social Security Retirement Benefits?
You have three choices as to when you can begin collecting Social Security Retirement Benefits:
- Age 62 or
- Normal Retirement Age – For most this = age 67 or
- After Age 67 – This is called Delayed Benefits
When you reach age 62 you are eligible to begin taking Social Security Retirement Benefits. At age 62, you will receive 70% of the amount you are entitled to receive if you waited until Rull Retirement Age, which is approximately around age 67.
You can elect to delay receiving Social Security Retirement Benefits until age 70, which is three years after reaching Full Retirement Age (Approx. Age 67). If you do delay, your Benefits will Increase 8% per year. If you wait until age 70, your age 70 Benefits will be 24% higher than your age 67 Benefits.
If your Spouse did not work much, your spouse will be eligible to receive 50% of the working spouse’s Social Security Retirement Benefits.
If your spouse did work consistently, then your spouse will receive Social Security Retirement Benefits on their own Social Security Account, unless the Retirement Benefits are less than 50% of their Spouse’s Social Security Retirement Benefits. You get the higher of the two (your account vs. 50% of your spouse’s account).
In order to be eligible to receive Social Security Retirement Benefits, you must have contributed to Social Security for a minimum of 40 Quarters (10 years).
If your spouse dies, you are entitled to receive 100% of the deceased spouse’s Social Security Retirement Benefits, if that 100% is greater than the Retirement Benefits of the Surviving Spouse’s own account.
If you are Divorced, you are eligible to receive Social Security Retirement Benefits based upon 50% of your Divorced Spouse’s Social Security account, if you were married for at least ten years to a Divorced Spouse and the Retirement Benefit you are eligible to receive on your Divorced Spouse’s Social Security account is greater than the Retirement Benefits you would receive on your own Social Security account.
How are your Social Security Retirement Benefits Calculated?
The calculation of your Social Security Retirement Benefits is based on your Earnings over a forty-year period. The Lowest Five Years are then dropped and the remaining Earnings are averaged over the remaining thirty-five-year period. Each year you work beyond forty years of age will result in another Low Year of Earnings being dropped off and replaced by the higher year of earnings.
Should you take your Social Security Retirement Benefits at age 62?
- Yes, if you need the money.
- Yes, if you do not expect to live long.
- No, if you don’t need the money and expect to live up to your Life Expectancy.
Note, if you decide to take Social Security Retirement Benefits before you reach Full Retirement Age (Approx. Age 67), you will be limited to how much you can earn every year. If you exceed that Earnings Cap, for every two dollars of earnings above that cap, you will have to return one dollar of Social Security Retirement Benefits you received.
Should you Delay taking Social Security Retirement Benefits?
- Yes, if you don’t need the money and expect to live beyond age 79.
- No, if you need the money at Full Retirement Age (Approx. Age 67).
- No, if don’t need the money and do not believe you will live beyond age 79.
When should you apply for Social Security Retirement Benefits?
For those taking Social Security Retirement Benefits at age 62, three months before you reach age 62.
For everyone else, three months before you decide to take Social Security Retirement Benefits or three months before turning age 70.
How much of your Social Security Retirement Benefits will be taxed?
For Federal Income Tax purposes, the maximum amount of Social Security Retirement Benefits that could be taxed = 85%. It will be lower than 85% if your Income is below the 85% Modified Adjusted Gross Income threshold. If your income is very low, none of your Social Security Retirement Benefits will be subject to Federal income Tax.
Many States exempt Social Security from State taxation.
