When it comes to your retirement, you may have more than one option when it comes to Social Security. While the benefit is primarily a safety net for older Americans who have retired and no longer have an income from their job, there are other ways to take advantage of it.
Social Security benefits are not just based on how much you earned during your working years. There are various factors that can impact your eligibility, including whether you’re married or single, how many children you support, and even how old you were when you first started working.
Here’s what you need to know about Social Security.
- Social Security benefits can be a great source of income during your retirement years, but it’s important to understand how they work. Here are some things you should know about Social Security benefits:
- Social Security benefits are based on your earnings history. Your benefits are calculated based on your 35 highest-earning years. If you have fewer than 35 years of earnings, your benefits will be based on your actual earnings history.
- You need to have worked for at least 10 years to be eligible for Social Security benefits. If you have less than 10 years of work history, you will not be eligible for Social Security benefits.
- Social Security benefits are not taxed. Your benefits are not subject to federal income tax. However, some states do tax Social Security benefits.
- Social Security benefits are not affected by inflation. Your benefits will not decrease due to inflation.
- Social Security benefits can be reduced if you have other sources of income. If you have other sources of income, such as a pension or an annuity, your Social Security benefits may be reduced. 6. You can begin receiving Social Security benefits as early as age 62.
Who is eligible for Social Security benefits?
The Social Security Administration (SSA) pays benefits to eligible retirees and their eligible spouses, minor children, and disabled adult children.
To be eligible for benefits, a person must have worked in jobs covered by Social Security and earned enough credits.
Nearly all American workers are eligible for Social Security benefits at some point in their lives, regardless of their age. The benefits are designed to keep retirees out of poverty.
In order to receive Social Security benefits, you must be either working or retired. If you are not working, and do not want to retire just to receive Social Security, you can apply for Supplemental Security Income.
SSI is a program designed to provide financial assistance to individuals with low incomes who have significant disabilities.
If you are between the ages of 18 and 65, and have a disability that prevents you from working, you can apply for SSI.
How much you’ll get from Social Security
Keep in mind that this only provides an estimate, as individual circumstances are unique. Your specific amount will be determined by a formula that takes into account your earnings history and the projected amount of money you’ll receive from your work history.
When you first start receiving your Social Security benefits at age 62, you will receive about 75% of the amount you would receive if you waited until full retirement age to start receiving benefits.
This percentage increases as you delay your start date, until you begin to receive 100% of your full benefit amount at age 70.
When and how to claim your Social Security benefits
When and how to claim your Social Security benefits is one of the most important decisions you will make about your retirement finances.
The best way to decide is to make a conservative estimate of your life expectancy and calculate the present value of each option.
For example, if you start collecting at age 62, your benefit will be reduced by 25% over the average life expectancy. In many cases, it makes sense to wait until age 70 to collect.
The extra eight years of payments will increase your monthly benefits by 76%. But if you expect to live only a few more years, it may be best to collect as soon as you can.
Remember, you are not entitled to any Social Security benefits until you have accumulated at least 40 quarters of Social Security taxes (or 10 years).
The first thing to remember is that you can claim your Social Security benefits at any point in your life. You are free to change your claim date as many times as you want, and there are no penalties for claiming benefits early.
That said, it is advisable to claim your benefits at the earliest possible date. This is because the amount of benefits you receive will be higher if you claim them early than if you wait to claim them at full retirement age.
The reason for this is that the government uses a formula to calculate the monthly amount you are eligible for, and your calculations will be lower if you claim benefits early than if you claim them later.
Strategies for increasing your Social Security benefit
There are a number of ways to increase your Social Security benefit. One way is to work longer and earn more money. This will increase your average earnings and result in a higher benefit.
Another way to increase your benefit is to delay claiming Social Security. For each year you delay claiming, your benefit will increase by about 8 percent.
While there are many ways to increase your Social Security benefit, not all of them are legitimate. That said, there are a few strategies worth noting. – Earn more during your working years – The amount of Social Security benefits you receive is based on your earnings history.
In other words, the more you earn, the higher your Social Security benefit will be. – File as early as possible – If you are able to start collecting your Social Security benefits as early as possible, you can increase the amount you receive each month.
– Delay claiming your retirement benefits – By waiting to claim your retirement benefits, you will receive a higher monthly Social Security benefit amount.
– Use the spousal benefits strategy – If you are married, and one spouse is receiving a higher benefit amount than the other spouse, you can claim spousal benefits in order to increase your total benefit payment.
– Add a spouse who is younger – You can also make sure that the spouse who is receiving a higher benefit amount is the spouse who is younger.
Social Security benefits are primarily a safety net for older Americans who have retired and no longer have an income from their job. While the benefits are designed to keep retirees out of poverty, the amount you receive is based on a formula that results in specific monthly payments based on your earnings history.
There are a few strategies you can use to increase your total benefit amount, but keep in mind that no amount of strategizing will ever make up for not earning more during your working years.