- Determine Your Benefits: In 2011, Social Security stopped mailing annual estimated benefit statements as a cost savings measure. Recently, they revised this change so everyone will receive a statement every 5 years. I recommend that everyone should track their benefits more frequently by creating an account at: http://www.ssa.gov/myaccount/
- Earliest Start Date: Age 62 is the earliest that a person can start taking Social Security. The drawback to starting early benefits is the amount is permanently reduced. Depending on your full retirement, benefits can be reduced up to 35%. Everyone should make an estimate of the break even date for taking benefits early versus your full retirement age versus age 70 bonus benefits. The difficult part is guessing the date of death. To calculate your reduction of benefits use this calculator: http://www.ssa.gov/oact/quickcalc/early_late.html
- Full Retirement Age: This depends on the year you were born.
1943 to 1954: age 66
Every year starting at 1955 to 1959 add 2 months
1960 and later: age 67
- When to Apply: You must be at least 61 years and 9 months old to apply for Social Security benefits. You should not apply for benefits more than 4 months before you want to begin benefits. Benefits are paid the month after they are due. Remember to sign up for Medicare 3 months before age 65.
- Spousal Benefits: If you are married, you or your spouse, but not both can receive spousal benefits. To qualify, the spouse applying for spousal benefits needs to be at least 62 years of age and the other spouse has to currently be eligible or receiving Social Security. Again, benefits will be reduced if the spouse is younger than their full retirement age. In some cases the benefit can be reduced to 35% of the spouses benefit. On the other hand, taking spousal benefits can allow the other spouse to delay benefits thereby increasing the benefits in the future (see file and suspend below).
- Income Limits: If you start benefits before full retirement and still work, your social security can be reduced. In the 2014, if you are younger than your full retirement age for the entire year the maximum amount you can earn is $15,480. For every $2 earned above the maximum amount, $1 will be deducted from your Social Security benefit. If you reach your full retirement age in 2014 your benefits will reduced $1 for every $3 over $41,400 until the month you reach full retirement age. At your full retirement age, there is no reduction of benefits on any amount of income you earn.
- File and Suspend: Do you want to increase your benefit 8% per year? If you file and suspend at full retirement age, Social Security will increase your benefit 8% for every year you wait up to age 70. This could increase your total benefit by as much as 76% over starting Social Security at age 62. One catch. Make sure you pay Medicare part B out of your own pocket. Otherwise Social Security will not increase your delayed benefit.
- Divorced: After full retirement age, ex-spouses can collect spousal benefits on each others work histories and delay their individual full retirement benefits. To qualify you must be unmarried, marriage had to be 10 years or longer, be at least age 62, if ex-spouse is deceased you have to be 60 or older. If the divorced is filing for spousal benefits between 62 and full retirement age you must have been divorced for at least 2 or more years and benefits will be reduced.
- Taxes: At full retirement age, the percentage of your social security benefits that are taxed depends on your income. Some sources like Traditional IRAs, SEPs, 401(k) withdrawals count towards your taxable income and can determine how much of your Social Security is taxed. On the other hand, ROTH IRA withdrawals do not count. Just another reason to consider contributing to a ROTH. The percentage of benefits that are taxable ranges from 0% to 85%. In 2014, joint filed taxes: Less than $32,000: 0% of benefits are taxed; Between $32,000 and $44,000: up to 50% of benefits are taxed; Over $44,000: up to 85% of benefits are taxed
- Self-Employed: If you are self-employed you can receive full benefits for any month in which Social Security considers you retired. "Retired" means you must not have earned more than the current income limit ($15,480 in 2014) and you must not have performed substantial services. The substantial services test is whether you worked in your business more than 45 hours during the month. If the work is considered "highly skilled" and you worked between 15 and 45 hours in a month then benefits could be denied. If you are under full retirement age for all of 2014 your earnings have to be less than $1,290 per month and did not perform substantial services. View this resource: NOLO
