Last month, I met a male client who lost more than $ 10,000 in social security benefits because he did not apply for widow's benefit for more than two years after his wife's death. Unfortunately, when he realized his mistake, he could only get six months of back benefits based on his wife's work history – the maximum allowed. This year he will still work, he will turn 70 and then start to benefit from his own account.
I think almost every reader of this column understands the basic rules of Social Security, starting at 62 (60 for widows and widowers) and maximum payouts at the age of 70.
A disparaging review of social insurance published in February reported that 82 percent of a sample of widows and widowers would have received significantly higher benefits if they had received survivors' pensions and their own accounts are expected to grow until they reach 70 at maximum.
However, I would argue that many of my readers do not know that the full retirement age, now 66 years old, is increasing for all those born after 1
Thus, for all those born in 1960 or after, the new full retirement age is 67 years!
Increasing the retirement age automatically y reduces benefits for those who start drawing early at the age of 62 or wait until the age of 70 (and those in between). For example, those born in 1960 who start payments at the age of 62 receive only 70 percent of their benefits instead of the current 75 percent. Even at the age of 70, they receive only 124 percent of their full retirement age of 67 instead of the 132 percent that are now paid.
Historically, receiving benefits at the age of 62 has been extremely popular – in 2013 it was 48 percent of women and 42 percent of men claiming benefits were 62 when they decided to start. A big drawback for those who receive social insurance before reaching full retirement age is that the labor income this year can not be higher than $ 17,040 – there is a 50% tax credit on wages above that amount! If you are under 66 years old and your wages are unexpectedly too high, you may suspend your social security payments and receive a credit when you resume them.
There is currently a staggering difference of 76 percent between the start of social security at age 62 and age 70.
This amount is based on a bonus of 8 percent for each year that is deferred until the age of 70 and does not even include the cost of living (COLA). The current maximum social security contributions for 62-year-olds are $ 2,153, $ 2,542 at the age of 66 (full board), and $ 3,538 at the age of 70.
Four years ago, I wrote my Social Security column – when I asked readers to postpone their performance – produced the most answers I've ever received. They were divided equally among those who believed that waiting was the best option, and those who argued should be taken as soon as possible.
Obviously retired low-income people are likely to register as soon as they retire. One third of current social security recipients aged 65 and over say that their social security contributions account for 90 percent of their total income. Anyone in poor health or having a suspected gene pool and premature deaths from their parents and other ancestors might be better off reclaiming them early. Finally, there is an argument that those who do not need the money can invest it to earn market returns.
Nevertheless, current forecasts suggest that the average 65-year-old man lives to 84 and the average 65-year-old woman dies at 86.
However, more and more well-educated healthy seniors will live in their 90s. As they wait to reach the age of 70, social security payments will generate much more income, considering the 8% jump every year and that does not even count annual COLA raises.
Another factor to consider is taxes on social security payments. You need to add half of your social security contributions to your other income to determine the taxes you pay. Singles with adjusted gross income of $ 25,000 or less and couples of $ 32,000 or less do not pay taxes on their social security income. Between $ 25,000 and $ 34,000 for singles and $ 32,000 and $ 44,000 for couples, you have to pay taxes on 50 percent of your social security payments. If singles earn more than $ 34,000 and couples earn more than $ 44,000, then 85% of social security revenue is taxed.
If you receive your spouse's or spouse's social security records for 10 years or more, you will receive 50% of your payout at a standard retirement age of 66 years.
Under the new Social Security Act of 2015, anyone born after January 1, 1954, may not receive spouse's pensions at the age of 66 to receive his or her own benefits until the age of 70. Instead, they receive the highest of their own account or 50 percent of their spouse's money.
Anyone born before 2 January 1954 should apply for a spouse's payment if they are 66 years old. You are married to someone who is 66 years old or older. Then, at the age of 70, after earning 8 percent annual benefits, they can switch to their own account.
Social Security Payments Calculated on Your Best 35 Years of Work, Inflation-Adjusted
The most popular strategy to increase social security and total retirement income is simply to work for a few more years. I often encourage early retirement when my client is dissatisfied at work and still has enough money to enjoy a retirement that can last 20 to 30 years or more.
Although I'm convinced that life is too short on a lousy job, I occasionally advise that it will be necessary to endure it for a few more years. If income permits, I advise maximizing his / her 401 (k) to $ 24,500 this year and putting $ 6,5000 into a Roth IRA. A major disadvantage of early retirement is that they have no access to the great tax havens of Uncle Sam.