Social Security Basics -- 5 Things to Think About Before You Apply

Townhall.com ^ | May 3, 2014 | Carrie Schwab Pomerantz

[Kaslin]

Dear Carrie: Several of my friends and I (all in our early 60s) are understandably thinking about Social Security. Everyone seems to have different ideas -- and different information -- about when to apply for benefits, how to apply, and how much we can expect to get. Can you give us a straightforward answer on what we should know? -- A Reader

Dear Reader: Since Social Security plays such a big part in people's lives, you'd think we'd have a better idea about how it all works. But on the contrary, a lot of folks don't fully understand their benefits or, more importantly, how to maximize them.

It's essential to take some time to consider your options before you apply, or you may miss out on thousands of dollars over your lifetime. There's a lot of helpful and detailed information at socialsecurity.gov, but for starters, here are five important things you and your friends should focus on:

1. UNDERSTAND HOW TIMING AFFECTS BENEFITS

With all the talk about the future viability of Social Security, many people think they should apply for benefits as soon as possible. But there's more to it.

In a nutshell, if you file at the earliest possible age, 62, your benefit is permanently reduced. If you wait until your full retirement age (FRA), which would be 66 for you and your friends, you collect 33 percent more. Wait until 70, and your benefit goes up by a total of 76 percent!

There's a point where total benefits balance out (a larger check for a shorter time), but, generally speaking, if you're healthy and longevity runs in your family, you'll increase your total lifetime benefits by postponing your start date.

2. FACTOR IN REDUCTIONS -- AND TAXES -- IF YOU CONTINUE TO WORK

In terms of timing, you also have to consider your work plans. If you take benefits before your FRA, and your income exceeds certain limits, part of your benefit is temporarily withheld. In 2014, $1 dollar in benefits is withheld for every $2 you earn above $15,480. The year you reach your FRA, $1 is deducted for every $3 you earn above $41,400. However, you do get this money back as an increased monthly benefit once you reach your FRA.

Taxes are another thing. Regardless of when you take benefits, 50 to 85 percent of your Social Security income may be taxable if your modified adjusted gross income reaches certain levels. For 2014, that's between $25,000 and $34,000 for individuals, and between $32,000 and $44,000 for married couples filing jointly. Your benefit might also bump you into a higher tax bracket. Best to discuss this with your tax adviser.

3. STRATEGIZE WITH YOUR SPOUSE

Working as a team, married couples have some choices that can significantly boost their combined benefit. That's because of the spousal benefit allowing one spouse to take up to 50 percent of the other's benefit (as long as that spouse has already filed), while letting his or her own continue to grow.

There are a number of ways to do this. For instance, in a strategy sometimes called the "62/70 split," the lower-earning spouse takes Social Security as early as age 62, while the higher earner delays until 70. In the meantime, the higher earner can take the spousal benefit as a bonus.

Another option is for the higher-earning spouse to apply for benefits at FRA, and then suspend them. The lower-earning spouse could then collect a spousal benefit based on the higher earner's record, while the higher earner's benefit continues to grow. This can get complicated, so, again, best to consult with a financial professional. But it's definitely worth exploring!

4. FIND OUT HOW MUCH YOU'LL COLLECT

Everyone age 60 or older who hasn't yet applied for benefits is mailed a yearly Social Security statement. This provides an estimate of retirement and disability benefits, as well as survivor benefits. Or you can create a personal account at socialsecurity.gov to access your statement. The site also has a number of calculators, which you can use to explore how different start dates or continuing to earn would affect your benefit.

For 2014, the maximum monthly benefit for a worker at FRA is $2,642. The estimated average monthly benefit is $1,294. And FYI, you can apply for benefits online when you're ready -- up to four months before your start date.

5. BE AWARE OF SURVIVOR BENEFITS, BENEFITS FOR EX-SPOUSES AND DISABILITY BENEFITS

While exploring timing and benefit amounts, it's also important to be aware that:

--At FRA, a widow or widower can collect up to 100 percent of a spouse's benefit (or reduced benefits at age 60). If you collect early and receive reduced benefits, that reduction also applies to your surviving spouse.

--Under certain circumstances, you can collect benefits based on an ex-spouse's record without affecting what your ex or your ex's current spouse can collect.

--If you're disabled and under full retirement age, you and your family members may qualify for disability benefits.

These basics are the same for everyone, but the individual decisions you and your friends make may well be very different. You'll each have to thoughtfully consider your choices based on your circumstances. In the meantime, this information should give you a lot more to talk about!

[mylife]

Good to know that being in a war zone will net you and extra $13 a month ☺

That's two packs of ciggies!

[Graybeard58]

Just from personal observation and may not apply in all cases:

My sister, aged 73 passed away in Jan, this year, my b.i.l. is indeed collecting one half of my sister's s.s. check plus 100% of his own.

I was suprised at this.

[RedMDer]

FReepers! Charge!
Two percent a day keeps the 404 away.


We need your help to keep the lights on.
FR is funded solely by contributions made by
liberty loving people who enjoy and use it.

Every donation counts no matter how big or small.
If you can donate $5, $10, $20, $100 or more,
it would be greatly appreciated.

Keep Free Republic Alive with YOUR Donations!
Make a difference.
PLEASE Contribute Today! 

Free Republic 2nd Quarter Fundraising Target: $85,000

Receipts & Pledges to-date: $33,493

39%

Woo hoo!! And the first 39% is in!! Thank you all very much!!

[gattaca]

I agree and plan to do so.

[First_Salute]

Helpful:

U.S. Social Security Retirement Estimated Monthly Payments Chart

Includes tips about filling out forms.

Includes a table illustrating "How Your Social Security Benefit is Reduced" by taking early retirement.

[Graybeard58]

If you have children (own or adopted) under 18, they will get additional benefits when you sign up for SS.

Yep, my wife and I adopted 2 children 2 years ago, who had been with us for 4 years prior, they each recieve a check equal to one half of mine, effectively doubling my s.s. check, all goes directly into my bank account.

(until the age of 19, if they are still in school)

[Gay State Conservative]

Given my medical history it's far from certain that I'll live to a ripe old age.And OsamaObamaCare makes it even *less* likely.as a result I applied when I was first eligible.It's a roll of the dice...the worst case scenario being that my decision will result in tough times in my last few years.

[hanamizu]

As you may or may not know, one incurs a lifetime penalty for delaying Medicare enrollment. My mother had excellent health insurance—she worked for an insurance company—and didn’t apply for Medicare for several years. She will pay increased monthly payments for the rest of her life.

[Graybeard58]

My step father, a Korean war vet, relied on the V.A. until he was about 80 years old, got disgusted with the V.A. and signed up for medicare, his premiums were double mine. He’s now deceased. I can vouch for the fact that V.A. care was lousy to him. (St. Louis area)

[ops33]

Exactly the reason why I will apply at age 62.

[ops33]

Thank you, I did not know that

[sheana]

Social Security is always short because there is no fund. It all goes into the general fund and gets spent. If it was an actual fund ( not counting the welfare programs that are a part of SS) and drawing interest they may have been able to stay in the black.

[Safetgiver]

unused benefits would be in the fund...Your first mistake is to believe there IS a fund. There is NO SUCH thing, the government uses last months payment to give away to foreign countries, welfare, statues of camels, etc., etc. This month’s payments go to SS recipients and THEN to foreign countries, camels and welfare. See? It all works out in the end.

[savage woman]

Can you collect at age 62 and still work perhaps part-time?

[Safetgiver]

unused benefits would be in the fund....NO! NO! NO! The SCOTUS said it is NOT. This was FDR’s means to introduce us all into the socialism he fervently desired.

[Safetgiver]

Can you collect at age 62 and still work perhaps part-time?...Yes. But be sure to stay under the yearly maximum allowed (presently about $15,500. If you go over, the will withhold the overage from one (or more) of your checks.

[mylife]

Exactly.

[savage woman]

Thank you..

[wayoverthehill]

That yearly mailed report is now past history.

**************************************************

I read a report yesterday on MSN Money that SS is going to resume sending the paper statements to people starting at age 25, then every 5 years after. If you are now 60, you will receive a paper statement.

[wayoverthehill]

Can you collect at age 62 and still work perhaps part-time?

*********************************************************

Yes you can but your earnings are limited. This year the amount you can earn without losing SS benefits is $15,400 & change. Once you hit full retirement age (66 or 67 depending on your year of birth) you can earn as much as you want. I started collecting at age 62 and have continued to work part time for 12 years now with no loss of benefits.