Don’t claim Social Security if you can’t answer these 4 questions

Seniors have many choices about when to apply Social Security. You can start your checks at 62 if you prefer to get your money as soon as possible, or you can wait until 70 years to maximize your monthly benefit.

The decision you make about applying for benefits will affect your finances during retirement and may even affect your spouse after you die.

That’s why it’s so crucial to make sure you know the answers to four key questions before you decide it’s time to collect retirement income from the Social Security Administration.

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1. What is your full retirement age?

Know your full retirement age (FRA) is crucial because your timeline for claiming benefits against FRA determines exactly how much your benefits will be. Your primary insurance amount, or standard benefit, is available only if you get checks at full retirement age. Unfortunately, many people don’t know exactly when that is.

The good news is that it’s easy to learn your FRA because all you need to know is your year of birth. The table below shows you exactly when your full retirement age is so you can answer this important Social Security question.

Year of birth

Full Retirement Age

1943 to 1954

66

1955

66 and 2 months

1956

66 and 4 months

1957

66 and 6 months

1958

66 and 8 months

1959

66 and 10 months

1960 or later

67

Data source: Social Security Administration

2. How does your current claim age affect your benefit?

As mentioned above, your standard Social Security benefit is the amount you will receive at full retirement age. It is based on a percentage of average monthly income, as determined by taking into account your 35 highest earning years (after adjusting for inflation).

But what happens if you? do not claim your benefits at full retirement age? After all, you can start checkups at any time after you turn 62. But before you do this, you should realize that you can get more or less than your standard benefit, depending on how old you are at the time.

If you apply for benefits before FRA, early filing penalties will permanently reduce the amount of monthly income. The benefit discount is equal to 5/9 of 1% for each of the first 36 months you are early, which equates to an annual reduction of 6.7%. If you start with checks more than three years early, you’ll see a 5/12 monthly discount of 1% per month, which equates to a 5% annual discount on distributions. This means that someone who starts at age 62 with an FRA of 67 will receive a discount of up to 30%.

But if you apply after FRA, the benefits increase by earning deferred retirement credits equal to 2/3 of 1% per month. The result is an annual increase in your standard benefit amount of 8%. However, you can only earn deferred retirement loans up to 70.

3. How does your work affect social security?

If you decide to work while receiving Social Security benefits and you have not yet reached full retirement age, here is what you need to understand: what impact? this choice will appear on your checks.

If you don’t reach full retirement age at any point during the year you work, you’ll end up losing $1 in Social Security benefits for every $2 earned over $19,560 in 2022. And if you reach FRA in 2022 but plan to to work before that time, you lose $1 in benefits for every $3 earned over $51,960. These limits are a slightly higher than those applicable in 2021, and they should continue to increase for most years.

Knowing them is critical because you don’t want to be surprised if you miss out on Social Security checks because your salary is too high. The good news, though, is that your benefits will eventually be recalculated at full retirement age, and your monthly Social Security checks will be slightly higher to account for the income you’ve lost working.

4. What consequences does your application have for your spouse?

Finally, you should think about how your choice to claim Social Security affects your spouse if you: married. If your husband or wife plans to claim partner benefits on your employment history, you must first apply for benefits, so your choice to defer may make their own claim impossible. On the other hand, if a higher earner receives benefits early, it reduces survivor benefits, which can put a widow or widower in trouble.

To make sure you don’t accidentally miss out on some of your Social Security income or doom your spouse to financial disaster, make sure you know the answers to all four of these questions before you even consider applying for Social Security. .


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