Tag Archives: social security benefits

Should I Delay Taking Social Security?

SSA-image-2My Comments: When do you plan to die? If you can’t answer that question, and instead assume you will live a long and productive life, then chances are you’ll want to delay the start of your monthly social security checks.

There are, however, valid reasons beyond an early trip to the grave to justify taking them sooner rather than later. Among those reasons are you can’t stand your job, your health is eroding as a result of your job, you have successfully accumulated enough savings so that you can easily say ‘take this job and stuff it’, and probably some more.

by Walter Updegrave @CNNMoney October 12, 2016

I understand that if I delay taking Social Security, I’ll receive a larger benefit. But while I’m waiting for that bigger benefit, I’ll have to withdraw more from my retirement savings, which means I’ll miss out on the investment gains those larger withdrawals would have earned. Given those lost investment earnings, am I really better off by waiting for a bigger Social Security check? –M.A.

It’s true that if you retire but wait to take Social Security to qualify for a bigger monthly check down the road, you’ll have to replace the income you would have received from Social Security had you taken it right away. Which means you’ll have to draw more from savings. So initially at least, the value of your nest egg will decline faster than it otherwise would have due to those larger withdrawals.

But while waiting for a bigger Social Security check will indeed result in a loss of investment earnings potential on your savings in the short-run, remember that you’ll be able to reduce the withdrawals from your nest egg when those bigger Social Security payments kick in.

So to gauge the effect on the value of your savings by starting Social Security early rather than later, you have to take a longer view. And you have to consider what you think you can reasonably earn on your retirement assets as well as how long you might live.

Here’s an example: Let’s assume you plan to retire at 62, at which point you qualify for a Social Security benefit of $1,500 a month, or $18,000 a year, an amount that will increase with inflation each year. And let’s further assume that you have $750,000 in savings from which you plan to withdraw an initial 4%, or $30,000, a figure you’ll also increase by the inflation rate each year. If you go through with this plan, you’ll have annual income of $48,000 ($18,000 in Social Security plus $30,000 from your nest egg) that will rise with inflation to help maintain your purchasing power throughout retirement.

Or, you could choose to postpone Social Security in order to qualify for a bigger benefit later on. Generally, your Social Security benefit rises by roughly 7% to 8% for each year you delay between age 62 and 70, after which you receive no increase for waiting. So if you hold off claiming benefits for four years until age 66 — the full retirement age for people born between 1943 and 1954 — you would receive $2,000 a month in today’s dollars, or $24,000 a year, which is a third more than what you would get at 62.

But if you decide to hold off for a higher benefit and still want to match the $48,000 in annual inflation-adjusted income above, you would have to get that entire amount from your savings for the four years until you begin collecting that higher Social Security benefit.

There’s no doubt that, initially at least, your nest egg will be smaller and thus have less potential to generate investment earnings if you opt to wait for the larger Social Security benefit. After all, you’ll be withdrawing $48,000 a year adjusted for inflation instead of $30,000. But after four years, the withdrawals from savings required to hit your annual income target will drop off by roughly half when your higher Social Security benefit kicks in. And at that point and every year afterward, you’ll be withdrawing about 20% a year less than what you would withdraw from savings with the lower Social Security benefit.

So the question is, if you opt to wait for the higher Social Security benefit, how long would it take until the lower withdrawals that start after four years of retirement and continue afterward allow the value of your nest egg to recover and eventually exceed what its value would be had you opted for the lower Social Security benefit that started sooner? Or, to put it another way, how many years does it take for you to come out ahead by waiting for a higher Social Security benefit?

The answer depends in large part on how much you think you can earn on your retirement investments after inflation. Basically, the higher the real, or inflation-adjusted return, you earn, the longer it takes to come out ahead waiting for the higher Social Security benefit.

For example, if inflation cruises along at roughly 2% or so a year and your investments earn 6% — a real, or inflation-adjusted, return of about 4% — it would take until age 83 or so for you to come out ahead by opting for the larger Social Security benefit. In other words, you’ll end up with the same retirement income plus a larger nest egg as long as you make it to age 83. If, on the other hand, inflation runs at 2% but you earn, say, 7% on your retirement investments — a real return of about 5% — it would take another few years, until age 86, for the higher Social Security benefit option to pay off.

Of course, you could delay taking benefits even longer in hopes of a still higher Social Security payment. In the scenario above, for example, waiting until age 70 to collect rather than age 66 would result in a benefit in today’s dollars of $31,680, compared with $24,000 at 66. But holding off from age 66 to age 70 would require more years for you to come out ahead. Assuming an annual real rate of return of 3% to 5%, you would have to live until your mid-to-late 80s to early 90s to be better off waiting for the higher benefit.

Given those ages, does it make sense to hold off for a higher Social Security benefit if doing so might leave you with a smaller nest egg unless you live into your early-to-late 80s? Obviously, that depends a lot on the state of your health and whether you come from a family that has a history of long lifespans. But generally people nearing or entering retirement in decent health have a pretty good shot at living into their mid-80s and beyond.

For example, a 62-year-old man in average health has a 53% chance of living to 85, a 34% chance of making it to age 90 and a 26% shot at making it to age 92, while a 62-year-old woman’s chances are 64%, 46% and 37% respectively. The chances are significantly higher for 62-year-olds in excellent health. You can see your chances of making it to various ages based on your current age, sex and how healthy you are by going to the American Academy of Actuaries’ and Society of Actuaries’ Longevity Illustrator tool.

A few caveats: Postponing Social Security probably isn’t a good idea if poor health is likely to shorten your life expectancy (although it can still make sense if your spouse will be depending on your benefit after you die).

Delaying also may not be a smart move if doing so would cause you to deplete all or virtually all of your retirement savings, leaving you with no savings to fall back on for unanticipated expenses and emergencies. (If that’s the case, however, you may not have adequate savings to retire and thus should consider working longer to bulk up the size of your nest egg.)

I’d also caution against overconfidence when it comes to investing. I get lots of emails from people who tell me they’re better off taking Social Security early and investing it rather than waiting for a larger benefit because they’re confident they can earn a high rate of return. People can disagree about what constitutes a realistic rate of return for someone in retirement. But given today’s low yields and predictions of modest returns in the years ahead, I’d say that a real return of 3% to 4% a year—that is, the return in excess of inflation—is probably reasonable for most retirees. You can shoot for higher gains, but doing so inevitably means taking on more volatility, which raises the possibility that your nest egg could be so decimated by a severe market setback that it might never completely recover.

Clearly, deciding when to take Social Security is no simple decision, especially for married couples, who may be able to boost their benefits by coordinating when they claim. So at the very least it makes sense to familiarize yourself with the options available to you, which you can do by reading the Boston College Center For Retirement Research’s Social Security Claiming Guide. For help in sorting out those options, you may also want to consider checking out a service like Maximize My Social Security or Social Security Solutions, both of which rely on sophisticated software programs to make their recommendations.

Or you may want to consult a financial planner who can also factor the effect of income taxes into the analysis (which, to keep things relatively simple, I didn’t do in the examples above).

But the bottom line is this: If you can manage it, you’re generally better taking Social Security later rather than sooner, as a higher benefit that’s pegged to inflation acts as a form of longevity insurance that can help you maintain your standard of living throughout retirement, regardless of how the financial markets and your retirement investments perform.

How To Explore The World On Social Security Income Alone

My Comments: Let me know how this works for you…

Suzan Haskins and Dan Prescher – 09/06/2016

Sometimes it just pays to retire overseas … not only can you live much more affordably overall, but you can treat yourself to experiences you might not have access to or be able to afford at home …

One of the biggest advantages we’ve discovered in our 15 years of living overseas is the constant availability of travel and adventure … and a big benefit is how remarkably little it costs.

We’ve written before about the low cost of bus travel in Ecuador, where we live. For about $2.50 we can travel by bus from our home in Cotacachi in northern Ecuador to the capital city of Quito, two hours to the south. If we want to hire a private driver, we’ll typically pay $50 to $60 for that. Domestic airfares are low, too. You’ll rarely spend more than $50 to $70 to fly anywhere in the country.

So if, on a whim, we want to take a weekend junket to the city…or to the Amazon basin and one of Ecuador’s many rainforest lodges, or to a Pacific coast beach town … we can do that both easily and affordably.

Case in point … a few weekends ago, we took a Sunday trip — from 7 a.m. to 6 p.m. — to visit a national park in Ecuador’s Carchi province that’s home to one of the most unique ecosystems on the planet.

This tour cost just $25 apiece. (The U.S. dollar is Ecuador’s official currency, in case you’re wondering.) This included our transportation and driver/guide. We spent another $10 for our park entry and our eco-guide.

Along the way, we stopped for a breakfast of grilled cheese toast, eggs, fruit, yogurt and granola, coffee, and fresh-squeezed juice — just $4. Lunch was a choice of fresh-fried trout or grilled chicken with salad, rice and potatoes, more delicious juice, coffee, and homemade ice cream for dessert. The grand total for that feast was just $6 apiece.

Of course, just living outside the U.S. can be a daily adventure for a couple of U.S. Midwesterners like us, and we suspect the same is true for most North Americans we know who have moved abroad. But the opportunity to spend the day or weekend visiting someplace amazingly exotic and seeing something that you’ve never seen before … often right on your doorstep and often for less than the price of a fancy dinner back home … sets the adventure bar pretty high for us.

This most recent adventure took us up into the high-elevation Andes Mountains to explore an ecosystem that only exists between 11°N and 8°S latitudes, mostly in the northwest corner of South America. It’s called the páramo, and it’s a kind of alpine tundra that exists between 9,000 to 15,000 feet above sea level … from down where the trees start to get weird and stunted up to where the permanent snow line starts and almost nothing grows.

In Ecuador’s El Angel Ecological Reserve, the local páramo is an amazing wetland thanks to a convergence of air currents that brings fog and rain almost daily. A two-hour walk through the park takes you through two of the three main zones of a páramo ecosystem—first a walk through a stunted, twisted, shaggy barked forest of polylepis trees, some of the slowest-growing trees in the world—trees that only grow at high elevations. Climbing up, the forest soon gives way to a zone of grasses and stunted frailejones, a plant that looks like a cross between a dwarf palm tree and a cactus.

We thankfully didn’t walk up into the third zone of the paramo up near the snow line…but we could see it high above us.

Aside from the fact that the páramo only exists in very few places on the planet, it is even more special because, here in Ecuador, it forms a kind of huge geological sponge. The plants and soils trap the constant upper-altitude rain and fog and release it slowly into streams and rivers that flow down into Ecuador’s Andean valleys, supplying much of the fresh water for entire regions of the country.

In fact, there are places in the El Angel Ecological Reserve that look like broad, grassy avenues—a kind of Alpine mirage. Beneath the pathways, underground waterways flow through fine sandy mud…you can jump on the ground and feel it quiver and shake as though you’re walking on a sponge.

The opportunities to visit places like this in Ecuador are legion thanks to the little country’s geography and latitude. The Andes Mountains run right down Ecuador’s spine, from north to south. From the beaches at sea level on the Pacific coast, the country rises eastward to some of the highest mountain peaks on the planet before descending again into jungles from which spring major headwaters of the Amazon River basin.

The diversity is incredible, which makes for some really diverse and amazing opportunities to visit places unique on the globe. And luckily for us, it’s more than affordable to explore Ecuador. It’s easy enough to find comfortable hostels — yes, with private bathrooms — for anywhere from $20 to $40 a night, breakfast included. And you can spend more for more luxurious digs with all meals and tours included.

This isn’t just true of Ecuador, of course. Expats living overseas all have a world of such adventures to choose from. In eastern Mexico, the ruins of the entire northern Maya empire are day trips apart…and they sit atop an amazing geographical region of underground rivers and cenotes to explore. In Belize, the second-largest reef system on the planet lies just a few hundred yards offshore. In Costa Rica, a significant portion of the entire country is national parkland with some of the most bio-diverse flora and fauna anywhere.

The list of amazing places that expats have access to is as vast and diverse as the places they settle. It’s part of what makes retiring overseas such a worthwhile experience … it can be easy and affordable to indulge your inner explorer.

Social Security Tips For Working Retirees

SSA-image-3My Comments: Again, more useful insights about the Social Security benefits system. Even if you consider yourself already retired, understanding the ins and outs of the Social Security program might be very helpful to you. Reach out to me if you are still confused.

Fidelity Viewpoints – 04/20/2016

Do you plan to work in retirement? If so, you need to be aware, if you’ve begun taking Social Security benefits, of how your Social Security income may be taxed—and the earned income thresholds that determine the level of your taxes and any reductions in benefits.

Thirty-seven percent of people in a recent AARP survey indicated that they plan to work either full time or part time during retirement. Why? In addition to the financial benefits, many older workers find that a job can add valuable structure to their day and provide the mental stimulation that comes from interacting with co-workers, clients, and other work associates.

Among those who plan to work in retirement out of financial necessity, a survey by the Transamerica Center for Retirement Studies found 43% expected to use the money to cover essential expenses, 37% to pay for health care, and 20% to save more for retirement.

Whatever your reason for considering working in retirement, it’s a good idea to know how doing so will affect your Social Security benefits and your tax bill. Here are the facts plus some strategies to consider.

Temporary benefit reductions for earned income

Note that “earned” income includes wages, net earnings from self-employment, bonuses, vacation pay, and commissions earned—because they are all based upon employment. Earned income does not include investment income, pension payments, government retirement income, military pension payments, or similar types of “unearned” income.

The earliest age at which you are eligible to claim Social Security benefits is 62. If you claim your benefits and continue to work, there is an earnings restriction until you reach your full retirement age (FRA) of 66. If you have earned income in excess of $15,720 in 2016, your benefits will be reduced by $1 for every $2 of earned income over the $15,720 limit.

If you reach your FRA during 2016, the limit for earned income rises to $41,880 and the benefits reduction is $1 for every $3 earned over the limit until the month you reach your FRA. After that, there are no earnings limits and no benefit reductions based upon earned income.

For example, if your monthly benefit was $2,000, here is how much your benefit would be reduced for various levels of earned income at certain ages:

Income tax implications

Social Security benefits are subject to federal income taxes above certain levels of “combined income.” Combined income consists of your adjusted gross income (AGI), nontaxable interest, and one-half of your Social Security benefits. (See: “Income Taxes And Your Social Security Benefits ,” for more information.)

For individual filers with combined incomes of $25,000 to $34,000, 50% of your Social Security benefit may subject to federal income taxes. If your combined income exceeds $34,000, then up to 85% of your Social Security benefits could be taxed.

For joint filers with combined incomes of $32,000 to $44,000, 50% of your Social Security benefit may subject to federal income taxes. If your combined income exceeds $44,000, then up to 85% of your Social Security benefits could be taxed.

Regardless of your income level, no more than 85% of your Social Security benefits will ever be subject to federal taxation.

Additionally, 13 states also tax your Social Security benefits. The rules and exemptions vary widely across this group so it is wise to research the rules for your state or consult with a tax professional if this affects you.

Social Security and Medicare taxes

In addition to federal and possibly state income taxes, you will pay Social Security and Medicare taxes on any wages earned in retirement. There is no age limit on these withholdings, nor any exemption for any sort of Social Security benefits status.

The good news is that these earnings can also count toward the calculation of your benefits: Social Security checks your earnings record each year and will increase your benefit, if appropriate, based on these additional earnings.

What if you are making much less in retirement than before? Could it hurt your benefits? The answer is no, because the benefit payment is still based on your 35 highest years of earnings. At worst, there would be no impact; at best, it could help if this replaces any of the lower 35 years.

The big decision: When to claim Social Security

When to claim Social Security benefits will be one of the most important decisions that you make regarding your retirement, along with how to take retirement income from your various retirement accounts and how you will fund your health care needs in retirement. The following chart shows the difference for someone turning 62 in 2016. Let’s assume his or her annual salary at retirement is $100,000. The first set of numbers on the chart shows the benefit amounts he or she would receive by claiming at various ages.

The bottom row of the chart expresses the differences as a percentage of the benefit amount received by claiming at your FRA for someone born in the years from 1943 to 1954.

A change in the rules in late 2015 closed the door on the popular claiming strategy for couples that allowed one spouse to file and suspend his or her benefit while the other spouse files a restricted application for a spousal benefit based on the first spouse’s earnings record. This option ended as of April 30, 2016.

You should also be aware of a special rule for the first year of retirement. This rule allows you to get a full Social Security check for any whole month you’re retired, regardless of your yearly earnings. This helps people who retire in midyear or later who have already earned more than the annual earnings limit.

Going back to work—meet James

In our hypothetical example, James, age 64, retired at 62 from a plumbing supply company in the Chicago area, and claimed Social Security benefits as soon as he was eligible, at 62. James misses not having some structure in his day. He loves home improvement and helping people, so he found a job at a big box retailer. His wife, Arlene, age 61, is still working part time. Both have FRAs of age 66.

Three Social Security options for James to consider

1. Social Security do-overs are allowed within 12 months of commencing benefit payments. In James’s case, he missed this window for a do-over. You are allowed one lifetime do-over, or withdrawal of benefits, and you must repay all benefits received. This includes, in addition to your own benefits, any benefits received by other family members based upon your earnings record, whether or not they are living with you; any monies withheld for Medicare payments; and any garnishments that may have been withheld from your benefit payments. When you resume benefits at a later date, they will be at the starting amount for your age and earnings record at that new time.

2. Suspending your benefit is allowed once your reach your FRA. James can do this when he turns 66 if he chooses. The advantage is that his benefit will be suspended at the level at the time of suspension, and it can now grow until he resumes taking it at any point up until age 70, when it reaches its maximum level. The advantage for James is the accrual of delayed retirement credits, which will result in a higher benefit level when he resumes his benefit. However, he will pay taxes on earned income. Under the new rules, once James suspends his benefit, no one, including his spouse, can receive a benefit from his earnings record.

3. Filing a restricted application. Since Arlene did not turn 62 prior to December 31, 2015, she would not be eligible to file a restricted application for a spousal benefit based upon James’s earnings record once she reaches her FRA, to allow her own benefit to continue accruing. She would have to choose between filing a spousal benefit or her own benefit when she files. This might be advantageous for the couple, and could provide a reason for James to continue drawing his benefit.

Benefits of working longer

Working into retirement can help in your retirement planning, especially if your savings are running a bit behind your goals. Continuing to work allows you to keep building retirement savings. If you meet the eligibility requirements, you can contribute to a 401(k) or other tax-deferred workplace savings plan, a health savings account (HSA), and an IRA, even if you are collecting Social Security. You can also make catch-up contributions, which enable you to set aside larger amounts of money for retirement. The combination of the added savings, tax-deferred growth potential, the ability to delay claiming Social Security benefits, and the ability to defer tapping into your savings can be powerful, even at the end of your working career.

Social Security: 10 smart ways to get more benefits

My Comments: For most 21st Century Americans who live long enough to retire, a monthly check from the Social Security Administration is at the core of their future financial freedom. This is a state of mind that says we “have enough money coming in to pay our basic bills for shelter, for food, for transportation, and other basic needs”.

And since we live in a society where more money is better than less money, you owe it to yourself to understand how that monthly check is calculated.

Selena Maranjian, The Motley Fool – July 2, 2016

If you want to improve your retirement, look into how you can get more benefits from Social Security — because it’s a significant retirement income generator for most of us. According to the Social Security Administration (SSA), the majority of elderly beneficiaries get 50% or more of their income from Social Security, while 22% of married elderly beneficiaries and 47% of unmarried ones get fully 90% or more of their income from it.

Here are 10 smart ways to get more benefits from Social Security.

  1. Work for at least 35 years. The formula the SSA uses to compute your benefits is based on your earnings in the 35 years in which you earned the most. If you only earned income in 28 years, the formula will incorporate seven zeros, which will shrink your benefits to some degree. Are you planning to retire after 33 years of work? It might be worth it to work two more years if you want to get more benefits.
  2. Earn more. Since the formula focuses on your 35 highest-earning years, another way to increase your benefits is to beef up your earnings. You may have 35 years of earnings already, but if you’re earning $85,000 now and some of your early years feature incomes of, say, $15,000, you can increase your ultimate benefits by working a little longer so more of your high-income years can be included in the calculations, replacing some low-income years.
  3. Check your record. You can look up the SSA’s record of your income and taxes paid into the Social Security system any time, and see estimates of your future benefits, at the SSA website. It’s worth an occasional visit in order to make sure  your earnings and taxes paid are correct. If they’re not, you might end up receiving smaller benefit checks than you’ve actually earned.
  4. Delay collecting. A simple way to make your Social Security benefits bigger — potentially a lot bigger — is to delay starting to collect them. You can start as early as age 62 and delay up to age 70. Each of us has a “full” retirement age (typically 66 or 67 these days) and for every year beyond that  you delay, your benefits will grow by about 8%. Delay from age 67 to 70, and you’ll get benefits that are 24% bigger.
  5. Start collecting at 62. If you live an average life span, though, you won’t come out ahead much by delaying, because you’ll get fewer checks, in total, than those who started earlier with smaller checks. If you live much longer than average, though, waiting will have been worth it. But if you have reason to believe you will live a shorter-than-average life, or you simply need the money, go ahead and start collecting early.
  6. Collect a spousal benefit. If your spouse has a richer work history than you do, you may be able to collect a “spousal benefit,” based on your spouse’s earnings and not your own. Spouses can collect benefits worth up to 50% of their other half’s benefits. This can be particularly welcome for spouses who never worked or earned very little.
  7. Don’t earn too much if you’re working in retirement. If you’re planning to start collecting benefits before your full retirement age and you want to work some then, too, be careful — because after a certain point, your benefits may be reduced. The SSA explains: “If you’re younger than full retirement age during all of 2016, we must deduct $1 from your benefits for each $2 you earn above $15,720.” The year you reach your full retirement age, the earning limit jumps to $41,880, and the penalty decreases to $1 withheld for every $3 earned above the limit.
  8. Delay your divorce. If you’re divorcing after, say, nine years of marriage, consider staying married until 10 years have passed — if you can. Divorcees may be able to claim benefits based on their ex-spouse’s earnings — even if that ex has remarried — if they were married for at least 10 years. There are a few more rules related to this, so look into them if this might apply to you.
  9. Look into survivor and disability benefits, too. Social Security isn’t just about retirement. There are survivor and disability benefits available, too, as well as retirement benefits for dependents of retirees, in some cases. If your spouse passes away, you may be able to claim survivor benefits — and your children may receive them, too, through age 17. Social Security also offers disability benefits to people of all ages who qualify.
  10. Strategize. There are many more strategies related to Social Security benefits than you may realize. For example, if you’re part of a couple, or if you’ve lost your spouse, look into how much you can collect, and when, on your own record or on your spouse’s, ex-spouse’s, or late spouse’s record. You may be able to collect one early, then switch to another. Don’t be afraid to tap the services of a professional financial advisor, either, as a good one might be able to steer you toward a benefit-maximizing strategy. Favor fee-only financial advisors, whom you can find via referrals from friends or at the website of the National Association of Personal Financial Advisors.

When it comes to Social Security, the more you learn, the more you might collect.



How the The Social Security Spouse Benefit Works

SSA-image-3My Comments: Our Social Security system is a vital source of income for the vast majority of us who are age 62 and beyond. If you have a qualified earnings history, by the time you reach age 62 you can elect to start receiving a lifetime annuity, one that has a cost of living adjustment every year.

That’s not to say, however, that understanding all the variables and how they interact with each other, is a simple matter. This is a good start to understanding SPOUSAL BENEFITS and how this critical component may apply to you.

By Dana Anspach – July 08, 2016

1. Who is eligible for a spousal benefit

Both current spouses, and ex-spouses if they were married for over ten years and did not remarry prior to age 60, are eligible for a spousal benefit. You must be age 62 to file for or receive a spousal benefit.

You are not eligible to receive a spousal benefit until your spouse files for their own benefit first. Different rules apply for ex-spouses. You can receive a spousal benefit based on an ex-spouse’s record even if your ex has not yet filed for their own benefits.

2. How much can you get

As a spouse, you can claim a Social Security benefit based on your own earnings record, or you can collect a spousal benefit that will provide you 50% of the amount of your spouse’s Social Security benefit as calculated at their full retirement age (FRA). (Each person’s FRA depends on their year of birth.)

If you file before you reach your own FRA, your spousal benefit will first be calculated as 50% of what your spouse would get at their FRA, but then it will be further reduced because you are filing early.

You are automatically entitled to receive the benefit that provides you the higher monthly amount; either a benefit based on your own earnings, or the spousal benefit, and prior to reaching FRA, Social Security makes this determination for you.

If you were born on or before January 1, 1954, after you reach FRA, you can choose to receive only the spousal benefit, and delay receiving your retirement benefits until a later date, allowing you to receive a higher benefit later based on the effect of delayed retirement credits.

Due to new Social Security laws that went into effect Nov.2, 2015, if you were born on or after January 2, 1954 you will not be able to restrict your application and only receive spousal benefits. For anyone born on or after January 2, 1954, when you file you will automatically be deemed to be filing for all benefits you are eligible for.

3. How early retirement affects things

If you collect a spousal benefit, and you begin collecting this benefit before you reach FRA, your benefit will be permanently reduced. To see how this reduction is calculated visit the Benefits For Spouses section of the Social Security website.

If your spouse takes Social Security early, and you take a spousal benefit early, you will be significantly reducing the amount of benefits that may be paid out over your lifetime and will have permanently reduced the survivor benefit that either of you is eligible for.

Married couples can get more in Social Security payments by coordinating how and when they should each begin collecting benefits. You can run these numbers yourself to see how it works by using an advanced Social Security calculator.

4. When you are a widow or widower

If you are a widow or widower you can collect a survivor’s benefit as early as age 60.

Widows and widowers can restrict their application to file for either their own benefit or the widow/widower benefit, and then later switch to the other benefit amount. You might do this if your own benefit amount at age 70 would be larger than your widow benefit. You could claim the widow benefit for several years, and then at 70 switch to your own benefit.

Once you and your spouse are receiving Social Security benefits, upon the death of your spouse, you will continue to receive the larger of your benefit, or your spouse’s, but not both. This means if you have a longer life expectancy, and you are collecting a benefit based on your spouse’s earnings, if your spouse starts taking Social Security early, it will result in a significant reduction in your benefit too, and the reduction will last throughout your life expectancy.

A surviving spouse living in the same household is eligible to receive a one-time lump sum payment of $255 upon the death of their spouse.

When married couples choose to maximize the highest earning spouse’s benefit by having that person delay collecting until age 70, it acts as a powerful form of life insurance. In many cases it provides the equivalent of $50,000 – $250,000 of life insurance benefit.

Overall, married couples in particular, can make better Social Security choices by working together and making decisions that maximize their spousal and survivor benefits. Too many couples overlook this, and end up getting less income.

Understanding Social Security Spousal Benefits

SSA-image-3My Comments: these details were found at a site called WiserWomen.com . They are consistent with my thoughts about how to get the most from the Social Security system as you ask questions to find the optimal timing to apply and possibly suspend your benefits. If you want a personal analysis and comprehensive report, talk with me. Their comments follow this first paragraph.

Social Security is a vital source of retirement income for most women. For this reason, it is important to understand how the spousal benefit works and how it can impact the amount of Social Security income you receive. While this fact sheet is written for women, the information here is the same for men who may want to claim the spousal benefit based on their wife (or ex-wife’s) earning record.

As a spouse, you can claim a Social Security benefit based on your own earnings record, or collect a spousal benefit in the amount of 50% of your husband’s Social Security benefit, but not both. You are automatically entitled to receive whichever benefit provides you the higher monthly amount. In order to qualify for Social Security spousal benefits, you must be at least 62 years old and your husband must also be collecting his own benefits. If your husband is of full retirement age and is not yet collecting benefits, he can apply for retirement benefits and then request to have the benefits suspended and receive delayed retirement credits until age 70. Once he has applied for and suspended his benefits, you would then be able to apply for spousal benefits. Additionally, if you are the higher earner, your husband can apply to collect spousal benefits based on your work record. It is important to note that claiming a spousal benefit does not impact the benefit amount received by the worker whose earning record is being used.

Taking Benefits Early

A full spousal benefit is worth 50% of the non-claiming spouse’s retirement benefit at their full retirement age (known as the “primary insurance amount”, or PIA). It does not matter when the non-claiming spouse actually filed for their own retirement benefit. Therefore, even if your current or former spouse is receiving a reduced benefit as a result of early claiming, your spousal benefit will not be affected. What CAN impact your spousal benefit, however, is if YOU claim the benefit before your own full retirement age. For example, if your full retirement age were 66, then the following reductions to benefits would apply:
• At age 65, you would receive 45.8% of your spouse’s benefit.
• At age 64, you would receive 41.7% of your spouse’s benefit.
• At age 63, you would receive 37.5% of your spouse’s benefit.
• At age 62, you would receive 35% of your spouse’s benefit.
It is also worth noting that unlike delaying your own worker benefit, there is no credit for delaying a spousal benefit beyond full retirement age.

Divorced Spouses
You can receive benefits as a divorced spouse on your ex-husband’s Social Security record, even if he has remarried and his current wife is collecting benefits based on his record. However, there are a few eligibility requirements:
• You must have been married to your ex-husband for at least 10 years.
• You must be at least 62 years old. However, if your ex-husband is deceased and you are currently unmarried, you may collect benefits as early as age 60 as a surviving divorced spouse. If he is deceased and you are disabled, you can collect benefits as early as age 50.
• Your ex-husband must be eligible for benefits. If he is eligible but is not currently receiving benefits, you can still qualify for spousal benefits if you have been divorced for two or more years.
• You must not be currently married. If you remarried and your second husband is deceased, you can claim benefits from either your first or your second husband as long as each marriage lasted at least 10 years.

Surviving Spouses
• If your husband passes away, you can collect survivor’s benefits as early as age 60.
• You are eligible to receive his full Social Security benefit amount if you claim the benefit at your own full retirement age. If you claim before your full retirement age, your benefit will be reduced. (You can learn more about this on the Social Security website by clicking here.)
• If your ex-husband is deceased and you remarry before age 60 (or 50 if you are disabled), you cannot receive survivor’s benefits unless the latter marriage ends (whether it be through death, divorce, or annulment). If you remarry after age 60, you can continue to receive benefits on your former husband’s Social Security record. However, if your current husband is also a Social Security beneficiary and you would receive a larger benefit from his work record than you would from your former husband’s record, you should apply for spousal benefits on your current husband’s record. You cannot receive both benefits.
• Regardless of your age or marital status, if you are caring for your deceased husband’s child or children, you would be eligible to receive benefits for raising them until they are 16 years old. These children can then continue to receive benefits based on your husband’s work record until they are 18 or 19, as long as they are unmarried. If a child is still a full-time student (no higher grade than grade 12) when they turn 18, they can continue to receive benefits until 2 months after they turn 19 or until they graduate, whichever comes first. Children who are disabled can also continue to receive benefits after they turn 18 years old.

Applying for Benefits
You can apply for benefits online by going to http://www.socialsecurity.gov. You can also apply over the telephone by calling 1-800-772-1213, or apply in person by visiting your local Social Security office. For more information on how to apply, visit www.socialsecurity.gov/retire2/applying8.htm.

To make the application process easier, you should know your husband’s (or ex-husband’s) date of birth and Social Security number. You may also be asked to provide certain documents as proof of eligibility, such as your birth certificate or other proof of birth, naturalization papers, W-2 forms, a marriage certificate, or divorce papers if you’re applying as a divorced spouse.

What You Should Know About the New Social Security Rules

SSA-image-3My Comments: If you have not yet signed up to receive your Social Security benefits, you would be well served to better understand the rules associated with Social Security. Believe me, it’s confusing to experts like me, much less someone with an aversion to thinking about money. Here’s a start to your journey.

Kristin Wong, June 1, 2016

Social Security is already a hot-button issue, and recent changes have people really freaking out about it, which makes it tough to get past the outrage and just navigate the facts. Here’s what you should know about the changes.

If you’re not familiar with how Social Security works, it’s okay—the program is complicated and frequently misunderstood, but the basics of taking benefits are simple to follow. Last year, the government signed the Bipartisan Budget Act into law, and the bill included some changes to the rules for collecting Social Security benefits. Those changes recently went into effect, and they axed some smart strategies that helped people maximize their benefits.

What’s Changed

If you retire after your full retirement age, you usually get 8 percent more until age 70. In other words, the longer you wait, the higher your payment. The SSA refers to this as delayed retirement credits. Up until recently, married couples used a couple of “loopholes” in the rules to get even more out of these delayed credits. The new changes closed the loopholes and eliminate these strategies.

You Can No Longer “File and Suspend” to Activate Benefits for a Spouse

Known as the “file and suspend” strategy, the loophole allowed married couples to delay one spouse’s benefit while the other spouse received a payout on that same benefit. It’s a little confusing, I know, but here’s how it worked in practice.

Basically, one spouse (usually the one who earned more money) would file for Social Security once they reached their full retirement age. Once they filed, Spouse #2 would then file for a spousal benefit, usually half of the full benefit. Spouse #1 would then suspend the benefit, postponing their own payout and letting their benefit grow 8% every year.

In other words, they file, take the spousal benefit, then suspend. Meanwhile, Spouse #2 gets a check every month, but the main benefit earns interest. You get the best of both worlds.

With the new rules, which took effect May 1st, this is no longer an option for most of us. According to the SSA:
… if you take your retirement benefit and then ask (on or after April 30, 2016) to suspend it to earn delayed retirement credits, your spouse or dependents generally won’t be able to receive benefits on your Social Security record during the suspension. You also won’t be able to receive spouse benefits on anyone else’s record during that time.

When you suspend benefits, you can no longer receive spousal benefits. The new rules don’t apply to people born before April 30, 1950, however. This gives recent retirees a chance to take advantage of the strategy they may have been counting on for income.

No More “Restricted Applications” to Collect Benefits While Sitting On Future Payouts

Along with “file and suspend,” some used a strategy called “restricted applications” to optimize their benefits. Going back to the previous example, this allowed Spouse #2 to receive spousal benefits while delaying their own Social Security benefits, which are separate. This way, both spouses could enjoy the annual 8% increase and still get paid every month.

Not anymore, though. The new rule, which applies to anyone born after 1954, eliminates restricted applications and forces you to take both benefits at the same time. Here’s how the Social Security Administration puts it:
if you are eligible for benefits both as a retiree and as a spouse (or divorced spouse), you must start both benefits at the same time. This “deemed filing” used to apply only before the full retirement age, which is currently 66. Now it applies at any age up to 70, if you turned 62 after January 1, 2016.

So if you apply for one benefit, whether it’s a spousal benefit or your own Social Security payout, you apply for both. Sounds fair enough, but here’s the kicker: you basically only get the higher benefit. The Motley Fool explains:
…that person won’t have the option to collect spousal benefits if his or her own benefit amount is higher. That person will therefore be left with a choice: Start taking benefits and lose out on the 8% annual increase for delaying, or hold off on taking benefits to capitalize on those delayed retirement credits and forego Social Security income in the interim.

That’s not exactly how the SSA puts it, but that’s the gist of what happens and why so many people are up in arms about the changes. Couples could lose out on hundreds or even thousands of dollars every month.

Even though the “Social Security Crisis” is overblown, it’s probably fair to assume that the rules are meant to maintain Social Security funds.

What Hasn’t Changed

People have strong opinions about Social Security. Many of the articles covering the changes seem to imply there’s been a huge overhaul that eliminates basic perks. This isn’t the case—spousal benefits and suspended benefits haven’t been eliminated or even reduced. However, the rules have changed to close some the loopholes that allowed people to really take advantage of those perks. Those changes could make a big difference for a lot of retirees (or soon-to-be retirees).

The most important takeaway, though, is that delayed retirement credits still exist. You still get an annual increase if you delay your Social Security benefits past your full retirement age. And this perk is the backbone for most Social Security withdrawal strategies. In other words, it’s still possible to strategize your benefits and get more out of them.

Your own approach to collecting Social Security depends on your own situation: how much you earn in retirement, when you plan to stop working, how much your living expenses are and so on. The Motley Fool suggests one common strategy, though:
If you want to take advantage of those delayed retirement credits but can’t wait that long to start receiving Social Security income, assuming both spouses worked, you could have one spouse (ideally, the higher wage earner) hold off on taking benefits while the other claims them earlier. This way, you get some income when you need it while allowing the higher wage earner’s benefits to grow.

The SSA also has a handful of calculators that can help you get an idea of what your own benefit amount will be, depending on when you take it and how much you earn.