Social Security Planning
What You Need to Know
Social Security was created in 1935 to help Americans supplement their retirement income. While almost everyone is generally familiar with Social Security, the details can be complex and easily lead to confusion.
As a Significant portion of the average retiree’s income comes from Social Security, it is critical to fully understand how it works. This guide provides a general overview of Social Security, explains the options that may be available to you, and answers the questions that people most commonly ask. Equipped with an understanding of the rules and your options, you can make more informed decisions and determine your best strategy for getting the most from Social Security.
Calculating Your Retirement Benefits
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Full retirement age is the age at which you can begin to collect full Social Security retirement benefits without any reductions. This is determined by the year you were born.
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Yes, you can receive Social Security retirement benefits as early as age 62.
If you begin to receive benefits before you reach full retirement age, your benefits will be permanently reduced. The amount of the reduction depends on the age when you begin receiving benefits and your full retirement age.
The amount you receive when you first begin taking benefits sets the base for the retirement benefits you will receive for the rest of your life. You will also receive any annual cost-of-living adjustments, and depending on your work history, you may receive higher benefits if you continue to work.
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If depends on your age.
If you are at or above your full retirement age, working will not reduce your Social Security benefit.
If you are under your full retirement age, $1 of your benefit is reduced for every $2 of wages you earn above an annual limit of $19,560 in 2022.
In the year in which you reach your full retirement age, from January 1 until the last day of the month prior to the month of your birthday, $1 of your benefit is reduced for every $3 you earn above an annual limit of $51.960 in 2022.
Benefit reductions do not continue past full retirement age. Your benefit will be recalculated so that you recover the previously withheld amounts over your remaining life expectancy.
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From your full retirement age until you reach age 70, for every year you delay taking your Social Security benefits, your benefits will increase by 8%
After age 70, the 8% increase does not continue. As a result, there is not incentive to delay taking benefits after age 70.
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Maybe, depending on the amount of other income you received in the year.
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Not necessarily. To determine a COLA, in the third quarter of each year, the Social Security Administration looks at what percentage increase an economic indicator has had since the third quarter of the precious year. Whatever percentage that indicator has increased will be applied to Social Security benefits for the next calendar year. If there is no increase, there can be no COLA. However, if there is a percentage decrease in that indicator, there is no subsequent reduction in Social Security benefits.
Calculating Spousal & Survivor Benefits
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When your spouse applies for Social Security benefits, they will be eligible for the higher of two different amounts:
Their own benefit (or)
Up to 50% of your benefit, assuming you have applied for Social Security benefits.
If you spouse is under full retirement age and their Social Security benefit based on their own work history is more than the spousal benefit, your spouse will not be eligible for a spousal benefit.
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For your spouse to be eligible for Social Security spousal benefits, you must have applied for Social Security benefits and your spouse must be at least 62.
If your spouse beings to collect spousal benefits before they have reached full retirement age, they will not be eligible for the maximum 50% spousal benefit.
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Generally, if a surviving spouse is over the age of 60, they can begin to receive survivor benefits.
The the surviving spouse is at full retirement age, their benefit is gernally equal to what the decendent’s Social Security benefit was, or would have been at the time of their doeath. Hoever, if the deceased spouse dies before full retirement age and has not yet begun receiving retirement benefits, the surviving spouse is entitled to a benefit equal to 100% of the deceased spouse’s fill retirement benefit.
If the surviving spouse is under full retirement age, the amount of the survivor benefit is reduced.
Understanding Divorced Spouse & Survivor Benefits
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Depending on the length of your marriage and whether you have remarried, you may be able to collect benefits based on your divorced spouse’s Social Security benefits. Collecting these benefits has no effect on your former spouse’s benefits.
In order to collect benefits from a divorced spouse:
You and your ex-spouse must both be over at the age of 62
Your marriage must have lasted 10 years or more
You must have not remarried
If your divorced spouse has not yet applied for benefits, you can still receive benefits based on their record if you have been divorced for more than two years.
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If your divorced spouse has passed away, you may be eligible to collect survivor benefits as a widow/widower if:
You are over the age of 60
The marriage lasted more than 10 years
You are not now remarried
OR
You are over the age of 60
The previous marriage lasted 10 years or more
You have remarried, but after the age of 60
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Generally, if a surviving spouse is over the age of 60, they can begin to receive survivor benefits.
The the surviving spouse is at full retirement age, their benefit is gernally equal to what the decendent’s Social Security benefit was, or would have been at the time of their doeath. Hoever, if the deceased spouse dies before full retirement age and has not yet begun receiving retirement benefits, the surviving spouse is entitled to a benefit equal to 100% of the deceased spouse’s fill retirement benefit.
If the surviving spouse is under full retirement age, the amount of the survivor benefit is reduced.
Medicare & Social Security
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Most Americans will become eligble for Medicare at age 65. If you are already receiving Social Security benefits at age 65, you will automatically be enrolled in Medicare. To enroll in Medicare, you must sign yp during a seven-month period that spans the three months prior to the month of your 65th birthday, the month of your birthday, and the three months following your birthday month.
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It is possible that your Social Security benefits check will lower than you had expected because of the deductions for Medicare premiums.
When you sign up for Medicare and you have already started to receive Social Security benefits, the premiums for Medicare Part B will automatically be deducted from your monthly Social Security check.
You may also elect to have your Part D premiums deducted from your monthly Social Security check.
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Your Medicare Part B premium for a given year is determined baesd on your reported income from two years prior. If your income exceeds a defined threshold, your premium will be increased.
Medicare Part A provides hospital insurance coverage.
Medicare Part B covers doctors’ services, outpatient hospital care, and other medical services.
Medicare Part C, also known as Medicare Advantage, covers the same services as Parts A and B through private health insurance plans.
Medicare Part D, provides prescription drug coverage.
Securing Your Retirement
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Begin Planning for Your Future
Conventional wisdom says you’ll need as much as 70% to 80% of your preretirement income, adjusted each year for inflation, to continue your current lifestyle. There are many factors to consider when deciding how much more money you will need from sources other than Social Security to create your retirement income.
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See if an Annuity Fits into Your Plan
Ask a financial professional about how an annuity may help provide protection for retirement. There are many types of annuity strategies that may help protect your retirement savings, offer opportunity for growth, provide tax-deferral advantages and give you the flexibility to access your account value if needed.