Social Security Milestones and How To Prepare For Them
An average of almost 67 million people will receive Social Security benefits in 2023, according to the Social Security Administration (SSA). It’s one of the most popular initiatives in America and a lifeline for retired people across the country.
Even so, confusion and misinformation continue to surround the program.
Benefits last for life, and your future financial security will depend on the choices you make and when you choose to make them. That’s why it’s critical to understand the key milestones you’ll encounter along the way, how they impact your benefits and what you should know before reaching each one.
Here are the biggest moments on your path to collecting Social Security.
Spousal Benefits Apply To Exes after 10 Years of Marriage
You might be eligible for Social Security benefits based on your spouse’s earnings if you’re married — or even if you’re no longer married, but were for at least 10 years. After a decade, people typically can claim half of their ex-spouse’s full retirement age monthly benefits — more if you’re a widow, widower or surviving divorced spouse. If you qualify for both your benefits and spousal benefits, you’ll get the higher amount of the two.
35 Years in the Workforce Buys You Full Benefits
One of the most important Social Security milestones starts being important long before you become eligible to claim benefits. Thirty-five years of employment is a key achievement in America’s safety net. That’s because the SSA bases your benefits on your 35 highest-earning years in the workforce. If you worked fewer than that, every unemployed year up to 35 counts as a zero toward your total.
In the world of money, zeros are good when they follow commas on checks and bank statements — not when they count toward your average payment.
You’re Eligible To Collect at 62
Your 62nd birthday presents one of the most consequential choices of your entire financial life — it’s the year you become eligible to claim Social Security benefits. There’s a lot to consider, but it basically comes down to whether you want to collect smaller checks for more years or bigger checks for fewer years.
The SSA reduces your benefits by 5/9 of 1% for every month you claim benefits between 62 and your full retirement age — more on that shortly.
For many people, there are 60 months between the time they become eligible to claim benefits at 62 and their full retirement age. That’s a 30% reduction that, for example, turns what could have been a $1,000 monthly check into 12 payments of just $700 per year.
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No Matter Your Social Security Strategy, Join Medicare at 65
There are pros and cons to taking Social Security early that each family must weigh individually, preferably with the advice of a financial professional. But no matter your decision, the SSA recommends applying for Medicare within three months of turning 65, which is the year you become eligible.
Unlike Social Security, there’s no benefit to delaying Medicare coverage — but there are risks. If you wait more than three months, you could be stuck paying more for Part B (medical insurance) and Part D (prescription) coverage, and your coverage might also be delayed.
You Reach Full Retirement Age at 66 or 67
If you can wait four or five years from the time you become eligible at 62, you’ll receive the full benefit that you’ve been working for all these (hopefully 35) years.
Those born between 1943-1954 reach full retirement age at 66. It’s 67 for those born in 1960 or later, and the SSA uses months to partition the birthdays in between. For example, the full retirement age for people born in 1956 is 66 and four months. It’s 66 and eight months for people born in 1958.
Delayed Retirement Credits Start Accruing the Very Next Month
Just as the SSA docks those who claim their benefits early, it rewards those who choose late retirement in the form of delayed retirement credits.
Those born in 1943 or later get 2/3 of 1% added onto their benefits for every month they wait beyond full retirement age. That’s 8% extra per year that you can earn just by being patient.
Additional Credits End When You Turn 70
The SSA does not let you build credits indefinitely. You can use delayed retirement credits to grow your Social Security payments up to 124% of your full benefits. At 8% per year, that would take three years. There’s no rule that says you have to take Social Security when you turn 70, but that’s the year that it no longer benefits you to keep waiting.
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