Part of the debate around Social Security is about when is the best time to apply for benefits. The latest report from the Social Security Board of Trustees indicates that Social Security’s trust fund reserves will be depleted by 2035. After that, Social Security would pay out about 80%, dropping to 75% in 2093. These are developments to keep in mind when you plan your Social Security strategy. Refer to this guide when you’re ready to apply for your retirement benefits from the Social Security Administration.
This guide to applying for Social Security benefits will cover:
- What Is Social Security?
- How To Apply For Social Security Retirement Benefits in 3 Simple Steps
- Applying For Other Social Security Benefits
- When To Apply For Social Security
- Working While Receiving Social Security
- How Much Will I Receive?
- Making the Personal Choice of When It’s Time To Take Social Security Benefits
- What To Expect After You Apply For Social Security
Social Security is a social insurance system that is meant to provide economic security for older Americans. The way the system works is that workers and employers pay Social Security taxes that are distributed to retired or disabled Americans and their families or survivors. Currently, about 174 million workers are paying into the system, and about 67 million are collecting monthly benefits. Social Security retirement benefits are only intended to provide about 40% of a retiree’s income on average, but many seniors are in the position where they have to rely on Social Security payouts.
In addition to retirement benefits, Social Security pays out disability, Medicare, survivor spouse and child benefits, among others. The process of applying for each type of benefit is similar. However, when most people speak of applying for Social Security benefits, they’re referring to the retirement benefits.
You can apply for Social Security benefits as soon as you reach 61 years and 9 months of age. To qualify for Social Security retirement benefits, you need to earn 40 credits. As of 2019, you earn one credit for every $1,360 you earn, up to four credits per year.
The process of applying for Social Security benefits is simple and can be completed in just three general steps:
- Gather documentation.
- Contact the Social Security Administration office, either online, in-person or on the phone.
- Request benefits.
You can get your Social Security application status via the same method you used to apply.
Here’s a deeper dive into each of the three steps for applying for retirement benefits from the SSA:
1. Gather Documentation
When you apply for Social Security benefits, you’ll need to provide the following information:
- Date and place of birth
- Social Security number
- Information about current or former spouses, including dates and places of your marriage(s), and dates of divorce or death, if applicable
- The names of any unmarried children under the age of 18
- The account number and routing transit number of your bank or credit union
- Your citizenship status
- Whether you, or anyone on your behalf, has filed for Social Security in the past
- Whether you have used a different Social Security number
- The month you want your benefits to begin
- If you are within 3 months of age 65, whether you want to enroll in Medical Insurance, also known as Medicare Part B
You’ll also need to provide the following information about your work:
- The name and address of your employer
- Your earnings for this year and the prior year
- A copy of your Social Security statement or a record of your earnings
- The beginning and ending dates of any military service before 1968
- Whether you became unable to work due to illnesses or injury in the last 14 months
- Whether you or your spouse have ever worked for the railroad industry
- Whether you have earned Social Security credits under another country’s system
- Whether you’ve qualified for a government pension
At the time of your application, you might need to provide original documents to the Social Security office, such as your Social Security card, your original birth certificate and a copy of your W-2 and/or self-employment tax return from the previous year.
2. Contact the Social Security Administration
Applying for Social Security can be completed online at the Social Security website, on the phone at 800-772-1213, or in person at your local Social Security office. If you are overseas, you can contact the nearest Social Security office, embassy or consulate.
3. Request Benefits
When you apply for Social Security benefits, you’ll have to indicate which type of benefit you’re requesting. In most cases, this will be the retirement benefit. However, you should also review whether or not you’re entitled to any of the other benefits offered by the Social Security system.
Although Social Security retirement benefits are the most commonly discussed, for the people who draw benefits from the other programs offered by the Social Security system, they are equally important. Here’s a look at how to apply for Social Security benefits in addition to retirement payments.
To claim survivor benefits, you’ll need to notify Social Security of the worker’s death as soon as possible. If you’re already receiving spousal benefits, you generally won’t have to apply for survivor benefits, as they’ll automatically be converted after the death is reported. If you’re receiving your own retirement or disability benefits, you’ll need to apply either online, in-person or on the phone; you might be entitled to a higher benefit. As with other applications, the SSA might request documentation, such as a death certificate, proof of citizenship, your birth certificate, your marriage certificate, tax returns and military records, if applicable.
As soon as you become disabled, the Social Security office asks you to apply either in-person, over the phone or via the website. Disability claims take longer to process than others, typically from three to five months. Providing relevant documentation — such as medical information — at the time you apply for Social Security disability can make the process move more rapidly.
Supplemental Security Income benefits are payable to disabled workers and their children with limited income and resources. You can also apply for SSI benefits if you’re over 65 and within certain income limitations. To apply, you’ll have to qualify via the Social Security Benefit Eligibility Screening Tool and provide necessary documents. The process is similar to applying for retirement benefits: Visit the Social Security Benefits website, call the SSA number or go to a Social Security office in person.
Medicare is the country’s health insurance program for people ages 65 and older and other disabled workers. You can enroll in Medicare starting three months before your 65th birthday, either online at the SSA website, on the phone or in-person at a Social Security office. You can sign up for Medicare Part A, hospital insurance covering inpatient care, and Medicare Part B, medical insurance including outpatient care and services, often requiring premiums. If you choose not to enroll in Medicare Part B when you sign up for Medicare Part A, you’ll pay a higher premium later on when you do register.
You might be entitled to retirement benefits under your spouse’s or former spouse’s account, even if you never worked under Social Security. The process is the same as if you are applying for your own Social Security retirement benefits. If you apply at the same time as your earning spouse, or if your spouse is already receiving benefits at the time of your application, the Social Security office will automatically check to see if you are entitled to any spousal benefits.
When you apply for Social Security retirement benefits, your children might also qualify for payments up to one-half the amount of your payments. To qualify, children must be:
- Under age 18, unless age 18 to 19 and a full-time student or disabled before age 22
The Social Security benefits application for children’s benefits is the same as applying for Social Security retirement benefits, but the Social Security office is likely to ask additional questions. For example, you’ll have to provide documentation on the child, such as a birth certificate. If a disability is involved, you’ll have to complete an adult disability form.
The looming question regarding Social Security typically centers around when you can begin drawing benefits. Retirement age varies depending on your date of birth. According to the Social Security Administration, “full retirement age” for people born in 1960 and later is age 67. For those born in 1937 or earlier, full retirement age is 65. People born between 1937 and 1960 have full retirement ages between 65 and 67. For example, if you were born between 1943 and 1954, your full retirement age is 66.
In spite of the official-sounding name, however, “full retirement age” isn’t the age at which you must take Social Security benefits — it’s only an option. You can begin drawing your Social Security retirement benefits as early as age 62, or as late as age 70. If you take Social Security as early as possible, your lifelong monthly benefit is reduced by about 30%. If you delay benefits until age 70, your monthly benefits will increase for every year that you delay. For people born in 1943 or later, benefits increase by about 8% per year that you delay.
Another factor to consider is how much you’ll be giving up by not taking Social Security early. You might receive a 30% reduction in benefits if you apply at age 62 instead of age 67, but you’ll also be enjoying those benefits for an additional five years — that’s 60 monthly payments. Say your full retirement benefit is $1,500 per month. If you draw Social Security at age 62 and pull down about $1,050 instead, by the time you reach full retirement age you’ll have already received about $63,000 in payouts.
Understand: How To Maximize Your Social Security Income
You don’t have to physically retire in order to be eligible for Social Security retirement benefits. Even if you’re still working, you can file for and receive Social Security. However, if you file before your full retirement age, your benefits will be reduced by $1 for every $2 in income that you earn from your job, above a certain limit — $17,640 for 2019. In the year you reach full retirement age, the reduction is $1 for every $3 in income you earn. Once you cross full retirement age, there is no reduction in your benefits.
Learn More: 10 Reasons You Could Get Less Social Security
The good news is you’re not actually “losing” those benefits. They’re simply not paid out to you while you’re working. You can receive them after full retirement age, when the Social Security Administration will increase your monthly benefit to compensate.
One of the downsides of working while receiving Social Security is that a portion of your benefits may be taxable. The amount that’s taxable and the earnings thresholds for tax year 2019 are as follows:
- For single filers earning between $25,000 and $34,000: Up to 50% of benefits are taxable.
- For single filers earning over $34,000: Up to 85% of benefits are taxable.
- For joint filers earning between $32,000 and $44,000: Up to 50% of benefits are taxable.
- For joint filers earning over $44,000: Up to 85% of benefits are taxable.
This doesn’t mean that you should stop working just to avoid taxes on your Social Security benefits, but you should be aware of the tax situation if you do continue to work.
Your Social Security benefit is based on your lifetime earnings. The SSA takes your highest-earning 35 years and applies a formula to them to calculate how much you’ll receive at your full retirement age. As of 2019, the maximum possible Social Security payout at full retirement age is $2,861 per month. However, the average monthly payout for all retired workers is $1,461. Those payments increase from time to time thanks to cost-of-living adjustments.
Here’s a look at the generational groups and how much each can expect to receive during retirement:
|Groups That Can Expect to Receive Social Security|
|Group||Year Born||Year Group Turns 65||Social Security Expected To Receive During Retirement|
|Baby Boomers||1955||2020||Male: $547,000
|Baby Boomers||1960||2025||Male: $587,000
|Gen X||1965||2030||Male: $657,000
|Gen X||1970||2035||Male: $724,000
|Gen X||1975||2040||Male: $795,000
You can get an online copy of your Social Security statement directly from the SSA. That statement will show your earnings record and estimated benefits at early retirement age, full retirement age and age 70, along with your potential spousal and disability benefit amounts.
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So, when should you take your Social Security benefits? The bottom line is that it’s a personal choice based upon a number of factors, including your current financial situation, your anticipated longevity, and whether or not you’re continuing to work.
But here’s a secret about Social Security that many taxpayers are unaware of: Your total lifelong benefits from Social Security are expected to be the same regardless of what age you start drawing benefits. Your benefits are increased as you delay your filing date, but your life expectancy is also shorter. On average, benefits will net out about even in the end.
You might be able to make real-life estimates that are more accurate than those you get from an impersonal Social Security calculator. If your family has a history of longevity and you keep yourself in good shape, for example, you might expect to live longer. In that case, you might consider delaying your Social Security filing for as long as possible. On the other hand, if you don’t have much saved for retirement and need as much income as you can get, filing early might make more sense. You should consider discussing these issues with a financial advisor and/or a tax specialist to help you make the right call.
For many retirees, once they’ve applied for Social Security retirement benefits, the checks come in like clockwork. As retiree Mae Gillespie told AARP Magazine, she has “…never had any problem, but I do know how to work a budget.” Ken and Claudia Adams, retirees in Las Vegas, consider their Social Security “…a valuable monthly asset,” noting that their “…Social Security check allows us to live very comfortably.”
Even if you’re living overseas, you can likely get your Social Security check directly deposited into your bank. One thing you should be aware of is that you can apply for additional benefits if different situations arise, such as if you become disabled or if your spouse dies.
And if there’s gridlock and political posturing in Washington in the future, you won’t have to worry about your Social Security payments. They’re considered “mandatory spending” and are not affected by government shutdowns. So, rest assured that short of the Social Security fund being completely depleted, you shouldn’t have to worry about receiving your benefits once you’ve filed.
John Csiszar worked for 19 years as a financial advisor both with a major wirehouse and at his own registered investment advisory firm. Along the way, he earned his Series 7, 63, and 65 licenses, in addition to a California Insurance License and a Certified Financial Planner designation.
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