Your Financial Future: Understanding Social Security
Whether you were already planning to retire or might need to do so earlier due to COVID-19, understanding Social Security is an important first step. It is one of the most valuable retirement assets you can have. You have been paying into SS starting with your first job. Both the employer and employee fund this important benefit. Self-employed individuals pay both halves.
Today蘑菇视频 discussion will only consider SS retirement benefits. Many people have three different ways to collect benefits. First is from their own work record. The Social Security Administration considers your 35 highest earning years. They use some calculations that adjust for inflation over your working life. If you wait until your full retirement age (FRA), you will receive 100% of your earned benefit. FRA depends on the year you were born in. Everyone born before 1954 has a full retirement age of 66. People born after 1960, have to be 67. Each year in between goes up two months.
You can start receiving SS at age 62, but your check will be smaller for life. At 62 you lose 25% to 30% of your benefit for life. You get more checks, but they are always smaller. Smaller checks receive smaller cost of living increases. If you delay starting your benefit at FRA, it increases 8% a year up to age 70.
People who are married get a special benefit. If you have been married for at least nine months, you might be eligible. If one spouse never worked outside of the house, they could be eligible to receive 50% of their spouse蘑菇视频 primary insurance amount (PIA) at their full retirement age. PIA is the amount you would receive at full retirement age.
If the spouse has their own SS work record, the SSA would consider their own record first. If you would receive $800 per month on your record and half of your spouse蘑菇视频 would be $750, you will receive your amount of $800. If half of your spouse蘑菇视频 is more than your own earned amount, you will receive the higher number.
If your spouse has passed away, you can receive a survivor蘑菇视频 benefit. Upon death, one SS check will stop. The good news is it will be the smaller one. However, if your spouse started receiving checks before their full retirement age, your check will be smaller. Upon one death, income goes down, many expenses remain the same and taxes go up because you lose a personal exemption and hit higher tax rates sooner. This is why SS planning is important.
If you were married for at least 10 years and divorced, you may be eligible to use the ex蘑菇视频 work record. As long as you have not re-married, their record can be used to determine spousal benefits. It does not matter whether the spouse re-married. You may also be able to collect survivor蘑菇视频 benefits from an ex-spouse after they have passed away. If you are married, your spouse must have filed for benefits for you to use their work record.
Having a plan to increase lifetime SS benefits can be very valuable. Normally the spouse with the highest benefit should try to wait to full retirement age or older to begin their benefits. This is because their account affects both spouses. Many couples receive hundreds of thousands of dollars or much more in lifetime SS benefits. These extra dollars can have a huge impact on your retirement.
Your Financial Future is written by certified financial planner Gary W. Boatman, MBA and CFP, who also wrote the book, 鈥淵our Financial Compass: Safe Passage Through The Turbulent Waters of Taxes, Income Planning and Market Volatility.鈥� If there is an area that you would like to see discussed in the column, send your suggestions to gary@BoatmanWealthManagement.com.