Social Security essentials

One of the most common mistakes individuals and couples make regarding Social Security is when they choose to start receiving benefits. Maximizing this benefit will go a long way in determining if you will enjoy an adequate and happy retirement.

When Should You Start Receiving Retirement Benefits? 

• Before your full retirement age?  As early as age 62
• At your full retirement age? Age 66-67
• After your full retirement age?  As late as age 70

 Why is it an Important Decision? 

• When you claim benefits can significantly affect your overall retirement income
• If you’re married, timing can also affect spousal/survivor income

 What Should You Consider? 

• Your full retirement age and benefit calculation
• Amount of your future benefit and effect of early or delayed retirement
• How long you expect retirement to last based on life expectancy
• Whether you plan to continue working
• Other sources of retirement income
• Income taxes
• How your spouse might be affected

How Is Your Benefit Calculated?

As you approach retirement age, your highest 35 years of earnings are indexed, then averaged, and a formula is applied  to determine your benefit at full retirement age.

How Much You’ll Receive:

Claiming Benefits Earlier 

• Can start benefits as early as age 62
• Benefit reduction —you’ll receive 25% to 30% less at 62 than at full retirement age
• Benefits received for a longer period of time

 Claiming Benefits Later 

• You receive delayed retirement credits, up until age 70
• Benefit is increased 8% for each year you postpone receiving benefits past full retirement age

Monthly Benefit Comparison: 

• Benefit at age 70 is 77% more than benefit at age 62
• But cumulative benefits from age 62 to 70 equal $134,400

Example:

How Working Can Affect Your Benefits:

Before Full Retirement Age

• $1 withheld for every $2 that earnings exceed annual limit of $18,960 in 2021

Year You Reach Full Retirement Age

• $1 withheld for every $3 that earnings exceed annual limit of  $50,520 in 2021

At or After Full Retirement Age

• Earnings will not affect your benefit

Taxation and Your Social Security Retirement Benefits:

Will Your Benefit Be Taxable?*

Up to 50% of your benefit may be taxable if your combined income* is:

• $25,000 to $34,000 and you file as single
• $32,000 to $44,000 and you file as married filing jointly

 Up to 85% of benefit may be taxable if your combined income* is: 

• Over $34,000 and you file as single
• Over $44,000 and you file as married filing jointly

^{*combined income = adjusted  gross income + nontaxable income + ½ of Social Security benefit}

How Your Decision Affects Your Spouse and What is the Appropriate Combination of Claiming Ages:

• Retirement benefits are based on your earnings record —at full retirement age you’re entitled to receive 100% of your full retirement benefit
• Spousal benefits are based on your earnings record —as much as 50% of your full retirement benefit if your spouse claims at his or her full retirement age
• Reduction for filing for spousal benefits early - spouse can’t file until retired worker files

 Survivor Benefits:

• Surviving spouse generally receives the greater of the retirement benefit  the worker was receiving or his or her own benefit
• Survivor benefits may be payable as early as age 60 _{(may be subject to reduction)}

The Power of Delaying Your Benefits:

Monthly Benefit Example

• Monthly joint income is $2,374 more if both spouses claim benefits at age 70 instead of at age 62
• Monthly survivor benefit for Spouse 2 also increases