submitted by Tim Goodwin
When planning for retirement, most people wonder what role, if any, Social Security will have in their financial future. Many doubt the program will even exist when they are finally eligible for benefits. While the fear is understandable, financial freedom is not possible if anxiety dominates your finances.
Specifically, there is often confusion about how to increase benefits and a misunderstanding of what will decrease them. Because we know it can be scary, here are the questions you should be asking.
Do I Need to Stop Working?
Quite the opposite. You can continue working while receiving Social Security, and doing so may actually increase the amount you receive. Every year, the Social Security Administration reviews your income, and if your income for the previous year was higher than the year they used to calculate your benefits, they will recalculate.
This is dependent on age. If you were born between 1933 and 1954, full age of retirement is 66. From 1955 onward, two months are added for every birth year until 1960, at which point, full age of retirement is 67.
If you are under full retirement age, the Social Security Administration will deduct $1 from your payments for every $2 you earn above the annual limit, which is $16,920 for the year 2017, and may increase in the future. In the year you reach full age of retirement, they will deduct $1 for every $3 you make above the annual limit, which for 2017 is $44,880, before the month you reach your full retirement age.
Once you’ve reached full age of retirement, your earnings will stop reducing your benefits.
How Much Will I Receive?
The maximum amount you receive is dependent on your retirement age. If you retired in 2016 at full age of retirement, your maximum benefit would be $2,102.
When Should I Apply?
You can actually start receiving Social Security benefits as early as 62, but this could reduce your benefits by up to 30%. If you wait until full retirement age, you will get full benefits. If you wait until age 70, you will earn “delayed retirement credits,” earning additional dollars.
The Social Security Administration uses your annual income to determine the number of delayed retirement credits you’ve earned. You can earn up to four credits in any given year, and you must have earned at least 40 credits total in your lifetime to qualify for Social Security benefits. For most people, this amounts to about a decade of work.
However, there are also other factors you should consider when making a decision about when to claim your benefits:
- Are you still going to work? If you plan to continue working, there are limits to how much you can earn from Social Security between age 62 and full retirement age.
- How long do you expect to survive after retirement? If your family has a history of living till 80 or 90, you may want to delay your benefits until age 70.
- How is your health? If you’re not in the best health, it could benefit you to start claiming your benefits earlier rather than later.
- Will you still have health insurance? If you retire from your job, you may also lose health insurance if you obtained it through your employer. However, you won’t be eligible for Medicaid until age 65.
- Are you eligible for other benefits? If you are a widow or widower, and have survived a deceased spouse, you may be able to apply for survivor’s benefits.
- Are you saving for retirement? If you’re like most people, you’re already saving for retirement. Fortunately, withdrawals from your own pension payments, annuities, interest, or dividends will not affect your Social Security income.
While it may not be wise to rely entirely on social security for your retirement, it can present a very useful supplement to your savings, pensions, and other sources of income.
While how-to guides are always helpful, sometimes you need need to meet with experts. If you live in the greater Atlanta area and are needing financial advice, schedule a meeting today with one of our advisors.