Posted on 05/03/2014 9:55:59 AM PDT by 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!
I found this link: Social Security to resume benefits statement mailings
They avoided doing that even when Obama was spouting his "tax the rich" routine. I suspect that's because the ruling class does not want to raise taxes with something that con't be overcome with deductions.
I don't have a problem with no cap. In government worker's pensions, everybody pays the percentage on their total income. It's a flat tax. If that doesn't happen, those with higher income are paying a lower percentage of it into Social Security.
I agree, cash is king.
“A bird in the hand is worth 2 in the bush should be the mantra with the politicians we have on both sides.”
Understandable; another issue is the devaluation of the larger “later” payout. It is already being done now.
“It is amazing to me that SS is always short of money, since so many parents and spouses die young and there is no way to actually reclaim their benefits.”
It isn;t as though though funds had been set aside, and now nobody needs them; the money those people contributed thirty years ago was spen paying retirees...thirty years ago.
“With some of the more extreme theorists, the chance that the government would look at total family assets is scary!”
This is already done for financial aid for college; if they are income-producing assets then it is done for taxation purposes as well. The left sees nothing extreme about factoring this into payments.
“That yearly mailed report is now past history.”
I’m not surprised; I couldn’t see how long they could keep promising so much to so many (and listing their historical contributions to boot).
“I look for the crooks in DC to remove the earnings cap on “contributions”
They already increase it, and over the last 20 years I doubt wage increases kept up with the BS increases put forth by government.
Call Social Security and make an appointment... they’ll explain it all...
Thank you.
I have not heard that the monthly benefit increases to replace what was taken from 62-65, for those that earn over $15,400.
How did that work?
However, you do get this money back as an increased monthly benefit once you reach your FRA.
I have not heard that the monthly benefit increases to replace what was taken from 62-65, for those that earn over $15,400.
How did that work?
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You must have addressed me in error. I have no idea what you are asking. I made no posts about getting money back.
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