While Social Security shouldn’t be relied upon to be the sole source of income during retirement, it can play an important role in your overall financial strategy for retirement. But making sense of the basic ins and outs of Social Security can be overwhelming. Here are three questions people commonly ask as they approach retirement age:
When can I start taking benefits?
While full retirement age is 66 for people born between 1943 and 1954 and gradually increases to age 67 for those born in 1960 or later, you can start receiving Social Security benefits at age 62.1 Keep in mind, however, that there is a cost to early distribution; your benefits are reduced by about 0.5 percent for each month you receive benefits before full retirement age.2 For example, those born in 1955 with a full retirement age of 66 and two months who start taking benefits at age 62 will receive about 75 percent of the full benefit.3
On the flip side, delaying benefits past full retirement age, up to age 70, increases your distribution amount. If the same individual in the previous example waits until age 68 to take benefits, his or her benefit will increase 8 percent each year after full retirement age. This increase continues until you reach age 70 or you start taking benefits, whichever comes first.4
What happens to my benefits when I die?
It depends. If you are married and your spouse is age 60 or older, he or she may be eligible to collect a survivor’s benefit. The benefit amount remains the same as the deceased’s amount, although that amount is reduced if benefits are started before the surviving spouse’s full retirement age.5 A spouse cannot collect both survivors benefits and retirement benefits based on their own work record. They will collect whichever benefit is higher.6
If you have a minor child or children, your surviving spouse (regardless of age) may also be eligible for a survivors benefit until the minor child turns age 16. If you have no surviving spouse or minor children, your benefit remains in the Social Security trust fund and is not paid out to any other named beneficiaries, unless they qualify under the Social Security survivors benefits eligibility rules.7
Can I work while receiving benefits?
Yes. However, if you haven’t reached full retirement age, your benefit amount will be reduced if your earnings exceed the limit. Starting with the month you’ve reached full retirement age, your benefits will not be reduced no matter how much you earn.8 The earnings limit and reduced amount vary according to your age. To find out how much your benefits might be reduced, use the Social Security earnings calculator at https://www.ssa.gov/OACT/COLA/RTeffect.html.9
Understanding Social Security can be challenging, but you don’t have to go it alone. Contact us today to learn more about how to incorporate your Social Security benefits into your complete financial strategy. We may be able to identify potential retirement income gaps and may introduce investment and insurance products as a potential solution.
1 Social Security. January 2017. “Understanding the Benefits.” https://www.ssa.gov/pubs/EN-05-10024.pdf. Accessed June 20, 2017.
3 Social Security. “Retirement Planner: Benefits By Year of Birth.” https://www.ssa.gov/planners/retire/agereduction.html. Accessed June 20, 2017.
4 Social Security. “Retirement Planner: Delayed Retirement Credits.” https://www.ssa.gov/planners/retire/delayret.html. Accessed June 20, 2017.
5 Joseph L. Matthews. Caring.com. Dec. 24, 2016. “What happens to the rest of a person’s Social Security money after they die?” https://www.caring.com/questions/social-security-benefits-after-death. Accessed June 20, 2017.
8 Social Security. June 15, 2017. “What happens if I work and get Social Security retirement benefits?” https://faq.ssa.gov/link/portal/34011/34019/Article/3739/What-happens-if-I-work-and-get-Social-Security-retirement-benefits. Accessed June 20, 2017.
9 Social Security. “Retirement Earnings Test Calculator.” https://www.ssa.gov/OACT/COLA/RTeffect.html. Accessed June 20, 2017.
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Content prepared by Amy Ragland.