HOW TO MAXIMIZE YOUR
SOCIAL SECURITY INCOME!
Disclaimer:
The intent of
this information is to educate and not give advice on Social Security,
Retirement, or any other financial matter.
The information with in this report is intended to be accurate and up to
date.
When to start taking your Social
Security benefits it is not always so easy to figure out, since there are
literally 567 different combinations to take into consideration. Never decide on your own when
you should start taking your Social Security benefits. You should always seek the advice of a professional.
Be sure to read
this report before contacting
SSA to gain the knowledge and confidence to work with your Social Security representative
to insure that you maximize
your Social Security benefits.
Abbreviations and Glossary
Adjusted Reduction Factor (ARF): Thanks to the Retirement Earnings Test when Full Retirement Age (FRA) is reached, Social Security will remove early retirement penalties for months checks were
not received.
Important: Early retirement checks received, does not remove
the early retirement penalty immediately if you die before Full Retirement Age.
For
example, If an
individual starts their social security benefits at 62 years old and then die, the surviving spouse will have the full 25% penalty
on widow/widower benefits.
Delayed Retirement Credit (DRC): This is an
increase of (8% a year) that you do not take retirement
checks at your Full Retirement Age (FRA), up to 70 years old. After age 70 increase stop.
Dependent Child:
Retired, disabled or deceased worker's
child who is unmarried and is (1) under 18 years old, or (2) under 19 years old and still in high school, or (3) has a disability that started before age 22.
Early Retirement Penalty: If you choose to take Social Security early, you lose 6.5%
per year. For example: If you decide to take early retirement at age
62, your social security benefit will be reduced by 25%.
Earnings Record (ER): The record maintained by the Social
Security Administration of all of your wages and self-employment earnings up to the yearly maximum.
Earnings Limit, Earnings Test, or Retirement Earnings Test: A Beneficiaries earning limits (retired workers, spouses, widows/widowers or
children) who are under their Full Retirement Age
currently at $15,120. (Disabled beneficiaries are exempt.) Social Security may withhold
some of the Social Security
checks of beneficiaries who exceed a certain amount of earnings from wages or self employment. The limits change each year with the cost of living.
Full Retirement Age (FRA): The age that you will receive full retirement benefits
without an early retirement penalty. The historical retirement age of 65 years old will be phased-in to 67 years old based on your birthdate (See chart on next page.). The
Full Retirement Age is different
for your own retirement benefit and for widow/widower benefits. (See chart below.)
Year
of Birth
|
Full
Retirement Age
|
Widow
/ Widower
Full
Retirement Age
|
||
1937 or Earlier
|
65 Years and 0 Months
|
65 Years
and 0 Months
|
||
1938
|
65 Years and 02 Months
|
65 Years
and 0 Months
|
||
1939
|
65 Years and 04 Months
|
65 Years
and 0 Months
|
||
1940
|
65 Years and 06 Months
|
65 Years and 02 Months
|
||
1941
|
65 Years and 08 Months
|
65 Years
and 04 Months
|
||
1942
|
65 Years and 10 Months
|
65 Years and 06 Months
|
||
1943
|
66 Years and 0 Months
|
66 Years
and 0 Months
|
||
1944
|
66 Years and 0
Months
|
65
Years and 10 Months
|
||
1945-1954
|
66 Years and 0
Months
|
66 Years
and 0 Months
|
||
1955
|
66 Years and 02 Months
|
66 Years
and 0 Months
|
||
1956
|
66 Years and 04 Months
|
66 Years
and 0 Months
|
||
1957
|
66 Years and 06 Months
|
66 Years
and 02 Months
|
||
1958
|
66 Years and 08
Months
|
66 Years
and 04 Months
|
||
1959
|
66 Years and 10
Months
|
66 Years
and 06 Months
|
||
1960
|
67 Years and 0
Months
|
66 Years
and 08 Months
|
||
1961
|
67 Years and 0
Months
|
66 Years
and 10 Months
|
||
1962 and later
|
67 Years and 0
Months
|
67 Years
and 0 Months
|
||
Indexed Earnings: You
become eligible for Social Security by
working in a Social Security-covered job
for at least 10 years. To be more
precise,
you need 40 credits. You can earn up to
4 credits per year by
earning a certain minimum dollar amount.
Month of Election (MOE): The month that you pick to start receiving Social Security checks.
Primary
Insurance Amount (PIA): The amount that you will receive at Full Retirement Age (FRA) or Onset of Disability or Death and that is used to figure the
payment amounts for you and your dependents.
Social Security Administration (SSA): The
United States Government
agency that administers Social
Security and Supplemental Security Income (SSI).
SSA also processes applications for Medicare coverage.
Supplemental Security Income (SSI): A program for low income aged, blind or disabled people administered by SSA but paid from general tax revenues, not from Social
Security funds.
Will Social Security go broke?
Social Security is the major source of income for 2/3 of seniors, it can't go broke. I do think though that Social Security in the future is
going to be much different than it is today.
With 16 Trillion in debt and 84 trillion of unfunded liabilities,
something has to happen. According to
SSA, there will be enough Social Security money to pay full benefits
until about 2033.
Let’s not spend time worrying about if Social
Security going broke, instead, keep reading and find out how to get your
fair share.
When it is
time to talk with Social Security (SSA),
should I call
or go into an office?
or go into an office?
Do both. First, call-800-772-1213
from 7 a.m. to 7 p.m. Monday
through Friday to get basic information from the Service Representative.
Then have that worker
make an appointment for you to apply for benefits
either over the phone or in person with a Claims Representative.
You
can apply for benefits online at the SSA website, www.ssa.gov
, without talking with anyone. However,
it is important to first talk with a SSA interviewer to learn about your
options before signing up for a particular benefit.
• SSA is busiest at the first of the month and on Mondays and Fridays.
What do I need before my interview with Social Security?
You need information about your family and work. When you call for the appointment, the Service Representative will tell you what documents
are needed.
TIP: SSA can tell you where to get some documents and even help you get them in some cases.
TIP: Some
benefits are paid only from the month you first contact
SSA. If you wait to talk with SSA until after you get all of your documents, you could lose out
on some money.
TIP: SSA agents are not allowed to give you
financial advice as to when you should start taking benefits. They are only allowed to provide you with
your options.
FYI:
Social Security laws are the
same for men and women,
husbands and
wives, widows and widowers or girls and boys.
How long before I Retire should I contact the SSA?
Actually, SSA will not let you apply until you are within 90
days of retirement.
• Even if you do not plan to start
checks at 62 years old, you
should contact SSA at that age to find out your basic
retirement amount and benefit
options. You need to learn about your options
regardless of your immediate plans.
Enter the benefit amounts
you get from SSA on Worksheet #2 for future reference.
TIP: You may be eligible
for Social Security
checks even if you keep
working.
TIP: You may be eligible
for checks as a spouse or widow/widower while your own
retirement account grows.
(Read the spouse and widow/widower sections) Common practice of Retirement Planner’s spouse
claims spousal benefit and delays her own.
To find out more about this strategy, give the Retirement Planning Store
a call at 309-696-8905 or email
us at Dan@retirementplanningstore.com To request a Free Report telling you exactly the best time for you to start receiving social security benefits click Here!
TIP: Social Security usually will not pay checks
to you for any months
before you apply.
If you snooze, you lose.
What is (PIA)
or Primary Insurance Amount?
SSA computes a Primary Insurance
Amount (PIA), which
is the amount that you receive at your Full Retirement Age (FRA). Every year, the maximum wages subject to Social Security Tax has
increased. The government takes your inflation-adjusted indexed monthly number
(AIME) and applies a 3-part formula to arrive at your primary insurance amount
or PIA calculation. This PIA is your guaranteed monthly benefit.
• Your actual check
will be less than your PIA if you retire before
your FRA.
• It will be more than your PIA if you retire after your FRA.
TIP: You can
calculate your PIA (full retirement age amount) by going to the benefit
estimator calculator on their website: www.socialsecurity.gov/estimator
Can I still retire at 62 years old?
YES. You can receive checks at 62 years old regardless of your Full
Retirement Age (FRA). However, you will have a permanent
early retirement penalty of 25% of your (FRA).
TIP: Caution: the early retirement penalty may lower potential
benefits to your spouse as a widow/widower. (If married,
read the section on widow's
benefits.)
Should I start my checks at 62 years old or wait until I reach my Full Retirement Age?
That depends on how long you are going to live. If you live to 78 years
old, the total
money you would get from Social Security
would be the
same either way.
• Since you lose about 6.6% a year by taking checks early, putting your early retirement checks in an investment that pays about that amount could offset the reduction.
• Usually, your dependent spouse and children
can get checks only if
you
do. This extra money for your family may offset any reduction
from the early retirement penalty.
For example, James would lose $250 for early retirement but gain $500 in
extra benefits for a spouse and/or children for a total of $1250. His family ends up gaining $250 by him retiring at 62. (See Glossary on page seven for definition
of dependent children.)
• If you die before you apply for Social Security
retirement, SSA does not pay the money you passed up to your estate.
• If you receive
early retirement checks, your spouse
may end up getting lower benefits as a widow/widower. The impact on future survivor benefits
depends on the percent of your early retirement penalty and when the surviving spouse starts checks. For example, if you start checks at 62 and then die, your surviving
spouse will have the full 25% penalty
on widow/widower benefits even if you received only one check before dying. (Have the SSA worker
explain how important this would be to you as a couple based
on your ages and PIAs.)
• Social Security can be taxed.
Consider
the best tax time to
increase
taxable income.
• Medicare starts at 65 years old regardless of when you retire or your
FRA (65 to 67).
You need to make sure you have health insurance
until
then.
TIP: You
may be able to get checks as a widow/widower and not start
your retirement checks until you are Full Retirement Age,
avoiding an early retirement penalty on your own record. (See
widow section)
TIP: You can get husband/wife or widow/widower benefits
from Full
Retirement Age
until you are 70 years old and then get a bonus on
your own retirement.
(This
is a great money making plan discussed in the next question.)
TIP: If
you have health problems, you may be eligible for disability checks.
Your Disability checks will be larger
than your Retirement checks
since you will not have an early
retirement penalty. Apply for
retirement and disability if you have health problems.
Should I delay my Social Security Benefits until I am 70
years old?
That depends on how long you feel you are
going to live. Every year that you delay
benefits, you payment increases by 8%.
There really are too many different variables when it comes to deciding
when to start taking social security benefits.
The Retirement Planning Store uses complex software that after
entering each person’s unique information, prints out a report as to how to
maximize their unique situation.
TIP: You can sign up at age 66 but suspend checks.
You still earn the
DRCs after age 66 but you can request the suspended checks
later.
For example,
you find out that you have a short
time to live or have a
financial emergency.
TIP: You don't earn any additional DRCs after you are 70 years
old so there
is no
reason to wait past age 70 to start
receiving your checks.
TIP: You need to consider
starting Medicare at 65 even if you don't start
checks.
If
you
are at your Full Retirement Age, you can get spouse's benefits while
letting your own retirement grow by DRCs
The way this strategy works Spouse delays her own benefit but
takes spousal benefit from age 66 to 70 at which time the Spouse then takes her
own benefit which has grown by 8% per year.
This is a strategy that can be illustrated with software used by the
Retirement Planning Store. Contact us
today to get your complementary report.
Or you can go to http://www.retirementplanningstore.com/income--asset-form.html
In another
example, Tom has a PIA of $1 000 and his wife Betty has a PIA of $500. At
her Full Retirement Age of 66 years old, Betty can get either $500 on her own retirement or $500 as a spouse.
If she takes the spouse benefit,
her own retirement will grow to $660 by 70 years old because of DRCs.
At that time, she can switch from the wife benefit
to her own retirement of $660 a month for the rest of her life. By using this procedure, Betty loses nothing and, starting
when she is 70, gains $160 a month for the rest of her life.
I want to keep working even after I start Getting Social Security.
If you have attained (FRA) Full Retirement Age, you can
earn as much as you want. If you are
taking early benefits then you can only earn up to $15,120 per year.
Years before
Full Retirement Age: You will have a yearly earnings limit of
$15,120 in 2014. SSA
will withhold one dollar from one monthly
check for every two dollars
you make over the limit.
|
Year of Full Retirement Age: In 2014, the limit is $40,080
for the period
from
January through the month
before your birthday month. For the limit, SSA counts the earnings only in the months
before your FRA month.
SSA will withhold one dollar from one check for every
three dollars you make over that limit. If James makes $49,080 ($9000 over the limit)
before his 66th birthday, SSA will withhold
$3000 worth of checks.
He will not get four checks at $750 each.
$3000) but he will get the next eight checks.
|
Years after your FRA: There is no limit. James can make millions of dollars
after his 66th birthday and still get all of his checks.
|
You can have a monthly earnings limit during your
first year of retirement.
You
can receive your Social
Security checks for any months
that you are under the monthly limit
(1/12 the yearly limit).
As an example, when James is 62 years old, he can make a million dollars
through June, then stop working, and still receive
all of his Social Security
checks from July through December.
|
TIP: If you do not receive some of your Social Security
checks because of
the Earnings Test, SSA will re-figure your early retirement penalty
when you reach your Full Retirement Age. You will be penalized for
only the number of months that you actually
received a Social Security
check.
TIP: Only current self-employment income or wages are included
in
your earnings limit.
You can exclude any money earned in prior
years but paid in the year of retirement such as vacation
payments, bonuses and commissions. Do not get penalized for
prior year's earnings.
TIP: Pensions, unemployment and interest do not count in the limit. Make sure SSA does not penalize
you for non-work income. Husband or Wife Benefits
What are the requirements for wife's benefits?
SSA rules for spouse benefits
are the same for men or women.
My wife has not worked long enough to get Social Security because she stayed home
to raise our
two sons. Will
her check be one-half of my check?
Her Full Retirement Amount will be half of your PIA. For example, if
Tom is due $1000 at FRA, Betty will get $500. However, the actual
check amounts
will depend on the ages of each spouse when checks
start.
As you can see in the following example,
Betty will get exactly
half of Tom’s amount only if she is the same age as Tom and
both
start checks at Full Retirement Age.
TIP: As a spouse, do not wait past FRA to start checks. A worker's Delayed
Retirement Credits do not increase the spouse's checks.
A spouse's check amount will never be over half of the worker's PIA even if the worker's check is increased because
of Delayed Retirement Credits (DRC). (See below)
Tom
|
Both 66 years old
|
Both 70 years old
|
|
Tom's check
|
$1000 (full amount)
|
$1320 (with DRC bonus)
|
|
Betty's
|
check
|
$500 (full amount)
|
$500 (no DRC bonus allowed)
|
My husband is still working but I want to start my Social
Security
now that I am 62. Can I get my retirement now
and then get extra when he finally retires?
YES. You can receive your own retirement
now. When your husband
finally retires, you will receive an extra amount if half of his
Primary
Insurance Amount (PIA) if more than your full PIA. Your spouse
amount will be reduced for early retirement
by only the number of months you are under your Full Retirement
Age when your husband finally retires.
For example,
if you are FRA when he finally
retires, you will not have a
reduction on the spouse portion of your check.
TIP:
Always check with SSA when a spouse or former spouse (if
married 10 years) applies for retirement or disability benefits or
dies. Have Social Security
workers cover your options.
Whenever you are eligible for more money
on another record or
type of benefit,
you can switch.
TIP: Be sure to read the tip at the end of the last question, if your husband
plans to wait until 70 years old to retire. He
can apply for Social
Security retirement but suspend
benefits so you can get spouse
checks.
Widow or Widower Benefit What are the requirements for widow's checks? The surviving spouse
(husband or wife) must have been married
to a deceased worker for at least nine months
(there are exceptions) and be at least 60 years old or at least 50 years old and disabled. In addition, a surviving
spouse would be eligible at any age if taking care of a child under 16 years old or a child who was disabled
before 22 years old and needs assistance.
• If the widow/widower is
under Full Retirement Age (66), Social
Security checks may be withheld
if still working.
• If your divorced
spouse dies, you can get benefits as a Surviving
Divorced Spouse if you were married for 10 years and are
currently unmarried.
• More than one spouse or divorced spouse can get checks from a
worker.
• Parents of a deceased
worker can get benefits if they were dependent on their adult
child. Check
with SSA.
If I die, how much will my wife get?
Basically, she is eligible for your Primary
Insurance Amount and any extra bonus from Delayed
Retirement Credits that you earned. The
actual amount of the check
depends on her age and whether she took early Social Security retirement. If she is over her widow Full Retirement Age (FRA) and you are not receiving checks yet, she will get your PIA amount
plus any DRCs. If y o u are receiving disability or retirement checks,
she will g e t the amount
of
your current check.
If she is over 60 but not at her widow FRA, she will get a percent of your PIA from 71.5 to 99.5%, (about .4% reduction for each month
under FRA). The general
rule is: the closer to her widow FRA,; the
larger the percent
of your PIA. However, if you have an early retirement penalty, she may end up with that penalty in her widow's check.
For
example, if your early retirement payment is 85% of your PIA, she will not get more
than 85% of your PIA regardless of when
she starts checks.
TIP: Widow Benefits
are not increased by DRCs if a widow does not take
checks at FRA; widows do not earn DRCs by waiting to draw
widow checks
at 70.
TIP: She may be eligible
on the record of a former spouse
who died. She
can get benefits from whichever record
pays the higher
benefit.
Alternatively, she can take one benefit
before she reaches
her widow
FRA (with a penalty) and switch to the other record when she is FRA
(without a penalty).
TIP: If
she was married ten years, she may be eligible as a divorced
spouse if an ex-husband is now retired or disabled
or has died.
|
Taxation
on my Social Security Benefits?
Depending
on your earnings, you are responsible for paying income taxes on a portion of
your benefits. The IRS adds half of an
individual's Social Security benefits plus all other income (such as pensions,
CD/bond interest or capital gains) to calculate the income taxes owed. In fact, up to 85% of your benefits could be
taxed.
Tax Status Threshold Limit
|
Single
Under $25,000 No Tax
Between
$25,001
- $34,000 50%
Above $34,000 85%
|
Married Under
$32,000 No Tax
Between
$32,001- $44,000 50%
Above $44,000 85%
|
All those years that you contributed to your qualified retirement plan receiving small tax deductions compared to the tremendous tax you are going to pay on 100% of the monies you have in your IRA, 401K, etc. Not only are you going to pay taxes on your qualified money, you may have to pay taxes on your Social Security.
When individuals and couples reach that magic number in income, $34,000 for a single individual and $44,000 for a married couple filing jointly, every dollar you earn over this limit that is not Social Security income can cause you to pay taxes on your Social Security income at the rate of 85%.
Many experts anticipate, much higher taxes. With a 17 Trillion National Debt and over 84 Trillion in unfunded liabilities, higher taxes are inevitable. Here’s what Dallas Salisbury, CEO of Employee Benefit Research institute
in Washington, D.C. said in March 2005 about taxes in the future: “I am
absolutely personally convinced that income tax rates are going to go through
the ceiling over the next 10 to 20 years.”
In light of the Great Recession, these words of Mr. Salisbury are even
truer today. If these expectations
materialize, then taking steps now to reduce future taxes makes a great deal of
sense.
It's not what you earn, it's what you keep that matters. www.retirementplanningstore.com/safe-money.html
By using a Social Security Calculator like to one below, you can determine when is the best time to start receiving your Social Security Benefits.
By using a Social Security Calculator like to one below, you can determine when is the best time to start receiving your Social Security Benefits.
It all depends on how long you think you are going to live.
If you would like to receive your own free personalized report, click here
