In March of 2015 I wrote a newsletter titled “Understanding Social Security.” Since that newsletter has been published some things have changed with social security that I would like to review. Some of the following information will be similar to the 2015 newsletter, but hopefully it’s a good update.
Basic Social Security information:
- Full Retirement age is 66 for people born between 1943 to 1959
- Anyone born in 1960 or later full retirement age is 67
Early retirement age:
- Anyone can start benefits at age 62, but there is an earning potential maximum before social security will start to withhold your benefits
- If you are under your full retirement age, taking social security and earning more than $16,920 a year then $1 of benefits will be withheld for every $2 of earnings exceeding the limit.
- Your benefits are reduced when taking your social security early; anywhere from 70% to 75% based on your age when you start
Late retirement age:
- The latest you can file and take your benefits is age 70
- You will receive an increase in your benefits if you wait until age 70
- The increase will be anywhere from 124% to 132% of your full retirement age benefit amount
- Married individuals can collect benefits on their spouse’s earning record if they have been married for at least one year, are at least age 62 and the other spouse is already collecting benefits
- The rule has changed here that everyone was used to a few years ago. You used to be able to have the higher earner spouse file for benefits, but not receive them so that the other spouse could start receiving benefits on the higher wage earner’s record.
- This rule is no longer in place; both spouses must be receiving the benefits for the lower wage earner to collect from the higher wage earner.
- The lower wage earner would get to select whether they wanted their full benefits or half of their spouse’s benefits – whichever is higher
- If the spousal benefits are taken at age 62 then the lower wage earner spouse will be eligible for 32.5% to 35% of the higher wage earner’s full retirement benefit amount
- If the spousal benefits are taken at full retirement age then the benefit is 50% of the higher wage earner’s benefit.
- A surviving spouse can receive a deceased spouse’s benefits or PIA if the marriage was 9 months or long
- And, you are at least 60 years old, unless disabled then you can be age 50 or caring for deceased spouse’s child of any age
- If the benefit is taken at age 60 the benefit is 71.5% of the full retirement benefit, but if taken at full retirement age then the surviving spouse is eligible for 100% of the deceased spouse’s benefit
Divorced spouse benefits:
- An ex-spouse is eligible for the other spouse’s benefits if the marriage is 10 years or longer
- The ex-spouse is at least 62 years old
- The other spouse has already filed for benefits
- And the ex-spouse interested in claiming benefits is unmarried (unless remarried after age 60 for survivor benefits)
- Someone who has more than one ex-spouse over 10 years or one ex-spouse and one deceased spouse can select whoever’s benefit is largest.
What is a restricted application?
- It’s the ability to be able to claim your spouse’s or ex-spouse’s benefit once you are full retirement age and allow your own benefit to continue to grow
- You have to born on or before January 1, 1954
- And, you can not have claimed your own benefits yet
- This is a pretty good deal because you can claim benefits on your spouse or ex-spouse while your benefits are continuing to grow and then you turn 70 drop your spouse’s benefits and collect your own that will be higher
- Even if you are a widow, you can claim your deceased spouse’s benefits for 10 years (from age 60 to 70) and then at age 70 if your benefits have increased to a value that is larger than your deceased spouse’s benefits you can switch. And, if you are a widow you don’t have to follow the January 1, 1954 rule – you can file a restricted application regardless of your birthdate.
If you have any questions about social security please let me know. I suggest reviewing the 2017 Social Security Reference sheet provided from Raymond James as a quick guide to social security.
CERTIFIED FINANCIAL PLANNER™
Anspach, Dana, August 6, 2016, Social Security rules for Restricted Applications, retrieved from https://www.thebalance.com/social-security-rules-for-restricted-applications-2388915
2017 Social Security Reference Sheet provided by Raymond James
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