The amount of Social Security benefits you receive depends on when you choose to retire. If you were born between 1943 and 1954, full retirement age is 66. If you were born between 1955 and 1959, full retirement age climbs toward 67 and if your birthday falls between 1960 or later, retirement age is 67. If you are reaching retirement age or have reached it and have not claimed your Social Security benefits, then you’re facing a decision that can affect the rest of your life.
How do you know if you are eligible for Social Security? You must earn at least 40 credits throughout your working years, meaning it takes about 10 years of work to qualify for Social Security income in retirement. To qualify for the maximum payment, Social Security benefits are based on 35 calendar years in which you earned the most money, with each year of zero earnings being considered as zero. For someone reaching full retirement age at 2021, the maximum monthly benefit is $3,113. For someone filing at age 70, that maximum monthly amount is $3,895.
Each year, the government adjusts the Social Security benefit for inflation. This is the cost-of-living adjustment to help keep pace with inflation. Some may refer to this as a somewhat of a “private annuity benefit,” but it is calculated based on changes in a federal consumer price index. In 2021, those receiving Social Security benefits are seeing a 1.3 percent cost-of-living adjustment in their monthly payment.
There is a spousal benefit that allows one spouse to claim up to 50 percent of the other spouse’s Social Security benefit, if their own benefit is not worth as much. The higher-earning spouse must apply for their own benefit first.
It is also possible for a lower-earning spouse to apply for benefits, then the other spouse can apply for a spousal only benefit while waiting until full retirement age to apply for their own benefit, allowing for half of the lower-earning spouse’s benefit until then. At age 70, the higher-earning spouse can switch and claim their own benefit. Also, if your spouse dies before you, you may choose to take a Social Security survivor benefit over your own. If at the time of the death you are at full retirement age, the benefit is worth 100 percent of what your spouse was receiving or would have been eligible to receive at the time of death.
If you delay claiming Social Security benefits from age 62 until age 70, you’ll potentially allow your benefit to grow by 8 percent per year during the years in between. Waiting can also benefit your heirs, since waiting to claim higher benefits ensures that the survivor benefits will be maximized, which can make a big difference for a surviving spouse. Claiming benefits after age 70 does not increase your benefits further, so there’s likely no good reason to wait longer than that.
In the event of a parent’s death, children up to age 18 or full-time students up to age 19 who have not yet graduated from high school may be able to receive up to half of a parent’s Social Security benefit. Disabled children older than age 18 may also qualify if the disability occurred before the age of 22 and the disability prevents the child from working.
You can work while collecting Social Security benefits. If you’ve claimed Social Security benefits and you’re younger than full retirement age, in 2021 you can earn up to $18,960 before losing one dollar for each two dollars earned. If you’ll be reaching full retirement age in 2021, the limit on earnings for the prior months before you reach retirement age is $50,520 before losing one dollar for every three dollars earned. However, once you are of full retirement age, you can make as much money as you want with no impact to benefits.
When you decide on the Social Security option that is best for your retirement plan, you must apply to start receiving benefits. You can apply for Social Security benefits online at www.ssa.gov. You may also visit your local Social Security office. Applications can be submitted for those who are at least 61 years and 9 months old. Some documents you may need include your Social Security card, birth certificate, marriage certificate, a recent W2 form or tax return, or even other documents depending on your situation.
If you are deciding whether to claim social security at age 62 or to wait, or if you would like guidance about how future Social Security payments will factor into your retirement plan, Bayntree is able to help you navigate your decisions. Please schedule an appointment on Bayntree’s online calendar by selecting the date and time that is most convenient for you! You can also always reach us by emailing info@bayntree.com.
Bayntree Wealth Advisors provides comprehensive financial planning and wealth management. The Bayntree team specializes in all aspects of financial health, including retirement planning, risk management, investment advice, tax strategies, estate planning and insurance.
Bayntree does not provide specific legal or tax advice. Please consult with your tax advisor or legal professional for guidance with your individual situation. Bayntree Wealth Advisors is not affiliated with the U.S. government or any governmental agency, including Social Security.
