The process of collecting Social Security sounds simple — reach retirement age, file for benefits and start receiving paychecks. However, if you want to maximize your benefits, there are certain questions you should ask before you file.
Click through to see what you should ask, and get the answers to your Social Security questions.
What Is My Full Retirement Age?
Your full retirement age, also known as your normal retirement age, is the age at which you can receive the full amount of your Social Security benefits. Full retirement age is defined by the Social Security Administration and varies based on your date of birth. If you were born in 1960 or later, full retirement age is 67. If you were born in 1937 or earlier, it’s 65.
When it comes to choosing your Social Security retirement age, your options are threefold. You can claim at your full retirement age, as early as 62 or wait until age 70.
This is important to know before you file because it affects the amount of your payout. If you file at age 62, your benefits can be reduced by as much as 30 percent. If you wait until after full retirement age, your benefits can increase by as much as 8 percent per year until age 70, if you were born in 1943 or later.
What Is My Breakeven Age?
A simple breakeven age calculation can help you determine when you should claim your Social Security benefits. Your breakeven age is the age at which your total lifetime benefit would be the same, regardless of which age you began taking benefits.
The calculation of your breakeven age depends on the amount of your benefit payments and when you claim them. You can use the Social Security Administration’s calculator to help determine your benefit amount. For most people, the breakeven age is somewhere between 77 and 83.
Have I Worked Enough Years?
Before you file for Social Security, make sure that you qualify. You’ll need 40 credits of coverage to qualify for Social Security retirement benefits. As of 2018, you get one credit of coverage for every $1,320 in earnings that you pay Social Security taxes on, up to a maximum of four per year.
Since quarters of coverage were defined differently in prior years, you can check with the Social Security Administration to determine if you have qualified for retirement benefits or what your shortfall is.
If you’re filing for disability or survivor’s benefits, you may not need 40 quarters of coverage. Check with the Social Security Administration or your tax advisor.
How’s My Health?
Your health can play a big role in when you should claim your Social Security retirement benefits. While no one can predict with certainty how long they will live, you can make an educated guess based on your family history, genetics and personal health situation.
If you’ve lived a healthy life and your family tree shows signs of longevity, you might be able to maximize your benefits by waiting to claim until after your full retirement age. If you’ve had health problems or if they run in your family, you might want to take benefits early.
Is My Earnings Record Correct?
Your Social Security benefits are based on your earnings record. This is a compilation of your earnings and Social Security taxes paid as recorded by the Social Security Administration. You can view your earnings record at any time on the Social Security Administration website, along with your projected benefits.
Because your benefits are based on your earnings, you should check your Social Security statement annually to determine that the SSA has an accurate record of your earnings.
The SSA uses your 35 highest-earning years to determine your benefits. If you have any low-earning years, or zero years, you can raise your benefit by replacing those years with additional higher-earning years. If you find any errors, you might be cheating yourself out of payments if you don’t have them corrected. The SSA publishes instructions on how to correct your record if there are errors.
What Are Spousal Benefits?
If you’re the spouse of an eligible recipient, you should ask about spousal benefits. You could end up receiving a benefit greater than one you might receive on your own. The beauty of spousal benefits is that you might be entitled to payments once you reach age 62 even if you haven’t worked.
You should ask the spousal benefits question even if you’re divorced. As long as you were married at least 10 years, you could qualify for spousal benefits from your divorced spouse — even if they remarried — as long as:
– You are at least age 62
– You are unmarried
– Your ex-spouse is entitled to benefits
– Your own benefit is less than your spousal benefit
If you claim a spousal benefit from your ex-spouse at full retirement age, you’re entitled to one-half of your ex-spouse’s benefit.
Does Social Security Pay Additional Benefits?
Social Security pays out more than just retirement benefits. Other people entitled to benefits under the program include:
– Dependents of beneficiaries, including spouses and children
– People who are disabled
– Survivors of workers who have died, including divorced spouses
– Dependents of workers who have died, including parents, spouses, children and divorced spouses
While you’re asking questions about signing up for Social Security, visit the SSA’s online Benefit Eligibility Screening Tool. Filling out the questionnaire will tell you which benefits you might be eligible for, along with information about how to qualify and apply for those benefits.
Will My Benefits Be Taxed?
For many recipients, Social Security benefits are tax-free. But if you have substantial income in addition to your Social Security payments, you might have to pay tax on up to 85 percent of your benefits.
The SSA defines income for these purposes as wages, self-employment income, dividends, interest or other taxable income that you’d normally declare when you file your taxes. Here are the income levels that determine the taxation of Social Security benefits.
Will Social Security Still Be Here in 2035?
There have been lots of alarming stories in the press about how Social Security will go bankrupt by 2035, so this is a very current and valid question. The truth is comforting — and concerning.
On one hand, the Social Security Trustees currently project that the Social Security surplus, which was $2.89 trillion at the end of 2018, will be exhausted by 2035. That doesn’t mean that Social Security will go away when that happens. The active workforce in 2035 will still be paying into Social Security, and that money will be disbursed to Social Security recipients.
However, if trends continue as they currently stand, that money will only be enough to pay about 80 percent of current Social Security benefits. This means that unless legislation is introduced to somehow raise revenue for the Social Security program, benefits will likely be cut by 2035.
Are My Payments Reduced If I’m Still Working?
If you have significant income beyond Social Security, those earnings could trigger taxation and a reduction in your Social Security payments.
The good news is that once you reach full retirement age, you’re entitled to your full benefits no matter how much money you earn. However, before full retirement age, your benefits will be reduced as follows:
– If you’re under full retirement age for the entire year, your benefits are reduced by $1 for every $2 you earn above the annual limit, which is $17,640 as of 2019.
– In the year you reach full retirement age, your benefits are reduced by $1 for every $3 you earn above a different limit, which is $46,920 as of 2019.
An important item to note is that this reduction in your benefits is not a withholding or a confiscation; you’re still entitled to get those payments back once you reach full retirement age.
About the Author
After earning a B.A. in English with a Specialization in Business from UCLA, John Csiszar worked in the financial services industry as a registered representative for 18 years. Along the way, Csiszar earned both Certified Financial Planner and Registered Investment Adviser designations, in addition to being licensed as a life agent, while working for both a major Wall Street wirehouse and for his own investment advisory firm. During his time as an advisor, Csiszar managed over $100 million in client assets while providing individualized investment plans for hundreds of clients.