When should you apply for benefits? Consider a few factors first.
Now or later? When it comes to the question of Social Security income, the choice looms large. Should you apply now to get earlier payments? Or wait for a few years to get larger checks?
Consider what you know (and don’t know). You know how much retirement money you have; you may have a clear projection of retirement income from other potential sources. Other factors aren’t as foreseeable. You don’t know exactly how long you will live, so you can’t predict your lifetime Social Security payout. You may even end up returning to work again.
When are you eligible to receive full benefits? The answer may be found online at socialsecurity.gov/retire2/agereduction.htm.
How much smaller will your check be if you apply at 62? The answer varies. As an example, let’s take someone born in 1953. For this baby boomer, the full retirement age is 66. If that baby boomer decides to retire in 2015 at 62, his/her monthly Social Security benefit will be reduced 25%. That boomer’s spouse would see a 30% reduction in monthly benefits.1
Should that boomer elect to work past full retirement age, his/her benefit checks will increase by 8.0% for every additional full year spent in the workforce. (To be precise, his/her benefits will increase by .67% for every month worked past full retirement age.) So it really may pay to work longer.2
Remember the earnings limit. Let’s put our hypothetical baby boomer through another example. Our boomer decides to apply for Social Security at age 62 in 2015, yet stays in the workforce. If he/she earns more than $15,720 in 2015, the Social Security Administration will withhold $1 of every $2 earned over that amount.3
How does the SSA define “income”? If you work for yourself, the SSA considers your net earnings from self-employment to be your income. If you work for an employer, your wages equal your earned income.4
Please note that the SSA does not count investment earnings, interest, pensions, annuities and capital gains toward the current $15,720 earnings limit.4
Some fine print worth noticing. Did you know that the SSA may define you as retired even if you aren’t? (This actually amounts to the SSA giving you a break.) For 2014, the SSA considered you “retired” if you were under full retirement age for the entire year and your monthly earnings were $1,290 or less.5
If you are self-employed, eligible to receive benefits and under full retirement age for the entire year, the SSA generally considers you “retired” if you work less than 15 hours a month at your business.5
Here’s the upside of all that: if you meet the tests mentioned in the preceding paragraph, you are eligible to receive a full Social Security check for any whole month of a year in which you are “retired” under these definitions. You can receive that check no matter what your earnings total for all of that year.5
Learn more at socialsecurity.gov. The SSA website is packed with information and is quite user-friendly. One last little reminder: if you don’t sign up for Social Security at full retirement age, make sure that you at least sign up for Medicare at age 65.
1 – socialsecurity.gov/retire2/agereduction.htm [11/6/14]
2 – socialsecurity.gov/retire2/delayret.htm [11/6/14]
3 – forbes.com/sites/janetnovack/2014/10/22/social-security-benefits-rising-1-7-for-2015-top-tax-up-just-1-3/ [10/22/14]
4 – ssa.gov/retire2/whileworking2.htm [11/4/14]
5 – socialsecurity.gov/retire2/rule.htm [11/6/14]
This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This material was prepared by MarketingLibrary.Net Inc., for Mark Lund, The 401k Advisor, Investor Coach and author of The Effective Investor. Mark offers investment advisory services through Stonecreek Wealth Advisors, Inc. an independent, fee-only, Registered Investment Advisor firm providing 401k consulting for small businesses and financial Advisor services for professional athletes and individuals. Stonecreek is located in Salt Lake City, Murray, West Jordan, Sandy, Draper, South Jordan, Provo, Orem, Lehi, Highland, Alpine, American Fork all in Utah.