It’s natural to be excited about the prospect of receiving Social Security benefits. You’ve been paying into the program for decades, so you naturally want to reap the benefits. However, rushing to sign up can end up costing you money in the long run.
Take a minute to make sure you know the answers to the three questions below before you fill out that application.
1. What difference does it make when I file for Social Security?
The size of your monthly payments is determined by the age at which you apply for Social Security. You can sign up as early as 62, but you must wait until your full retirement age (FRA) to receive the maximum benefit you are entitled to depending on your work history. There’s more on that later.
Delaying payments for a month boosts your monthly checks by a small amount until you reach 70 when you are eligible for the maximum Social Security benefit.
However, this does not always imply that deferring benefits is the best option. You must also consider your life expectancy and financial position.
Signing up for Social Security early is definitely a good idea if you don’t anticipate living long or if you can’t pay your bills without it. Otherwise, waiting to sign up will probably get you more in the long run.
2. When will I be able to retire completely (FRA)?
Based on your work history, your FRA is the age at which you become eligible for your full Social Security income. This is a number that the government allocates to you based on your birth year.
Your FRA is 66 if you were born between 1943 and 1954. Then, for those born in 1960 and later, it rises by two months per year until it reaches 67.
Those who enroll in Social Security at the age of 62 receive just 70% of their maximum benefit each check if their FRA is 67, or 75% of their FRA is 66.
Your maximal benefit is also influenced by your FRA. Those with an FRA of 66 earn 132 percent of their maximum benefit each check if they wait until they’re 70 to sign up, while those with an FRA of 67 get only 124 percent at 70.
Create an account at My Social Security to find out your FRA and learn how much you may expect from Social Security at different ages. You’ll have to answer some questions to verify your identity the first time you make an account, but after that’s done, you may create a password to log in again.
3. What effect will working while claiming Social Security have on my benefit?
While it is possible to claim Social Security while still employed, doing so may expose your payments to the Social Security Earnings Test. If your income reaches a specific level, this withholds a set amount from each of your benefit checks.
You’ll lose $1 from your paycheck for every $2 you make beyond $19,560 if you’re under your FRA for the entire year of 2022. If you reach your FRA in 2022, however, you will only forfeit $1 for every $3 you make over $51,960 if you do so before your birthday.
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The good news is that money lost due to the Earnings Test will not be lost indefinitely. The government recalculates your benefit amount after you reach your FRA to account for the money it previously withheld.
As a result, your next check will be a little greater. However, they won’t be nearly as large as they would have been if you had simply waited until your FRA to collect Social Security.
If you don’t need your Social Security payments to support your expenses, it may be wiser to sign up after you retire rather than working and claiming at the same time. Delaying benefits for even a few months can have a long-term impact on your paychecks.
Hopefully, none of the information above came as a surprise to you, but if anything did, you should evaluate the suggestions below and consider when you plan to apply for Social Security.
This may take some time, but it will help you obtain the maximum advantage possible, so it is well worth the effort.
Most retirees overlook the $18,984 Social Security bonus.
If you’re like most Americans, you’re behind on your retirement savings by a few years (or more). However, a few little-known “Social Security secrets” may be able to help you increase your retirement income.
For instance, one simple method may get you an extra $18,984 every year! We believe that once you understand how to optimize your Social Security benefits, you will be able to retire with confidence and the peace of mind that we all seek.