● The age at which you begin receiving benefits is an important consideration. In making this determination, you should know your full retirement age (FRA). For people born in the years 1943 through 1954, the FRA is 66. For people born from 1955 through 1959, the full retirement age gradually climbs towards 67. You can take early retirement as early as age 62, but this will result in a permanent reduction of your benefits. If your retirement age is 66, this reduction could be as much as 25%.
● Benefits are available to children of Social Security recipients if they are below a certain age. Children ages 18 and under, or between the ages of 18 and 19 who are attending elementary or secondary school full-time may be eligible for one-half of a parent’s Social Security benefits. In addition, children older than age 18 who became disabled prior to the age of 22 may be eligible for benefits based on a parent’s work record.
● To be eligible for Social Security benefits, you must have 40 quarters of coverage, or “credits.” You can earn up to four credits per year, meaning that you need 10 years of work in order to obtain coverage. For 2016 you must earn at least $1,260 in order to receive one credit, meaning you must have earning of at least $5,040 to get the maximum of four credits each year. Your highest 35 years’ worth of earnings are used to determine your benefit amount. If you have fewer than 35 years’ worth of earnings, each year with no earnings are factored in at zero. So, if you are older but have fewer than 35 years’ worth of earnings you may wish to consider working part-time in order to get some additional earnings factored into your benefit calculation.
● One of the nice features about Social Security benefits is that they are adjusted for inflation. This is known as the Cost of Living Adjustment, or COLA. The COLA is based on a broad index of consumer prices. Because prices were relatively flat last year, unfortunately, for 2016 there was no price of living increase.
● There is a marital benefit to social security. One spouse can receive spouse’s benefits of up to 50% of the other spouse’s benefits. However, the other spouse must be receiving benefits as well before this election can be made. Also, the benefit can be less than 50% if you claim benefits before your full retirement age. Even if you take early retirement based on your own earnings record and later switch to spousal benefits, the amount will still be less than 50%.
● Social Security also has survivor’s benefits. If your spouse predeceases you, you may be eligible to 100% of your spouse’s benefits if you are full retirement age. You can begin taking a widow or widower’s benefit at age 60, but the benefit amount will be reduced for an early election. You are not eligible for survivor’s benefits is you remarry before age 60, although you may be eligible if you remarry after age 60. Children who are eligible can also receive a survivor’s benefit of up to 75% of their deceased parent’s benefit.
● There are Social Security benefits for ex-spouses. If you were married for ten years or longer, are over age 62 and single, you are eligible for up to 50% of your former spouse’s benefit amount. Your ex-spouse does not even need to know because you apply directly through the Social Security administration, and your benefit does not affect the amount your ex-spouse receives. In addition, unlike spouse’s benefits, your ex-spouse does not need to be receiving benefits in order for you to qualify. He or she needs only to be eligible to receive benefits. You can also receive survivor’s benefits (100% of your deceased ex-spouse’s benefit) if your ex-spouse predeceased you and you do not marry before age 60.
● When you reach full retirement age, you can let your benefit amount grow by 8% per year by taking a delayed retirement. This growth continues until you reach age 70. This rule applies to survivor’s benefits as well, although it does not apply to spouse’s benefits. You can also use a strategy of electing spouse’s benefits at full retirement age and letting your own benefits grow until you reach age 70, at which point you can switch to your benefits. This rule applies only if you have reached full retirement age and were born on January 1, 1954 or earlier. The rule applies even if you are an ex-spouse who was married ten years or longer.
● There is such a thing as a “do-over” if you claim retirement early (resulting in a reduced benefit amount) and then regret the decision. If you stop your early retirement benefits within twelve months of beginning them, and pay back all the benefits you received, you will still be eligible for the higher benefit amount at full retirement age. Or, if you continue receiving your early retirement benefits until your full retirement age, and then suspend your benefits, you can still take advantage of the 8% growth per year of delayed retirement benefits. This can help you gain back much, if not all, of the benefit amount you may have lost by taking early retirement.
● Remember that Social Security benefits can be taxable. As a result of a law passed in 1984 (foreseen by George Orwell?), couples with a combined income of more than $32,000 may have to pay taxes on up to 50% of their benefits. Higher income couples may need to pay taxes on up to 85% of their benefits.
● You can lose benefits if you continue working and earn more than a specific amount. For the year 2016, you will lose $1 of benefits for every $2 you earn above the $15,15,720 limit. This rule does not apply after your full retirement age, at which point you can continue working and make any amount without forfeiting benefits. The good thing, however, is that forfeited benefits are not necessarily lost forever. Let’s say, for example that you take early retirement at age 62 and continue working until your full retirement age of 66. During that time, suppose you lost one year’s worth of benefits because of your work. At your full retirement age your benefits will be recalculated and increased as if you had taken retirement three years early, instead of four years early. Your benefits will be increased accordingly.
● https://www.kiplinger.com/slideshow/retirement/T051-S001-what-you-must-know-about-social-security/index.html (visited August 11, 2016). Credit to author Rachel Sheedy, from a post in June, 2016.
● There is a maximum Social Security benefit amount. For the year 2016, this amount is $2,639. However, it is only available to those who had the maximum taxable earnings for at least 35 working years. https://www.google.com/#q=maximum+social+security+benefit+2016 (visited August 11, 2016).
This material should not be construed as legal advice for any particular fact situation, but is intended for general informational purposes only. For advice specific to any individual situation, an experienced attorney should be contacted.
