Social Security

To apply for Social Security you can either visit the Social Security Administration (SSA) website which can be found at  https://www.ssa.gov/planners/retire/applying8.html, call the SSA office at 1-800-772-1213, or visit your local Social Security office at https://secure.ssa.gov/ICON/ic001.action#officeResults. The closest Social Security office is at Continental Plaza, Second Floor, 401 Hackensack Ave, Hackensack NJ 07061. Their hours are 9:00 am to 4:00 pm Monday through Friday. You can stop by without an appointment but we advise you schedule one to save yourself time.

When applying for our Social Security, it is necessary to have the following documents to complete the application:

1. Birth Certificate: to prove your date of birth and location of birth
2. Marital Status/ Divorce Documents
3. Birth Certificate of Spouse
4. Social Security number for you and spouse

During the application, your spouse should be in attendance and it is always a good idea to bring proof of identification with you. For more information about the documents required please visit https://www.ssa.gov/hlp/isba/10/isba-checklist.pdf. If you have questions, need advice or know someone who has questions about their benefit, please contact us.

4 Thoughts to Maximize Your Social Security Benefit

How long are you and your spouse going to live?  My clients’ answer, “Forever!”  My long-time client and I were reviewing his investment program when he mentioned that he had just returned from his Aunt’s funeral in Florida.  She lived to age 101.  My client’s mother had also lived to age 101.  His Aunt was actually a Grand Aunt!

Of course, Social Security works best for those who live the longest.  But Social Security Benefits are also maximized for those who wait longer to receive them…Survivor benefits are also maximized.  Consider Social Security as insurance if you live too long!

What will the inflation rate be in the future?  My ability to predict the future is precisely as flawed as your ability.  Recently we have gone through a period of long-term averages of 2 to 3% per year.  Social Security Benefits under current law are increased (but not decreased) for inflation.  Consider your Social Security Benefits as part of your investment plan that will increase with your increasing cost of living.

What will your investment return be in the future on other assets?  The future continues to be unknowable.  It is tempting to look at the past investment returns for guidance.  However, just because the past is measurable does not mean that it is useful to us.  As our disclaimer states, “Past performance does not predict future results”.  However, can you rely on Social Security payments in the future, or at least most of them?  Maybe your Social Security Benefits can be part of your overall fixed-income investment allocation.  This approach may allow for an increase in your stock or real estate allocation.

How long will your spouse live after you are gone?  The survivor of you and your spouse will receive the greater of your individual Social Security Benefits.  Consider making your Social Security Benefit decision with the goal of maximizing the survivor benefit.  This approach might be particularly appropriate for Social Security recipients where the benefits are a small portion of a monthly income.

Jim Vaughan and Vaughan & Co. Securities, Inc. provides individual analysis of Social Security designed to maximize your benefits for your personal retirement income investment plan.  Contact Jim at jdviii@vaughanandco.com

General Social Security Rules

Popular wisdom suggests jumping at the opportunity to collect Social Security retirement benefits as soon as possible, which currently is age 62.  About 73% of Social Security beneficiaries collect at 62.  While this strategy may have been prudent for millions of Americans in the past, longer life expectancies have changed the face of retirement planning. Waiting to collect Social Security benefits may well be a more advantageous option. While there is no one-size-fits-all approach, this much is universally clear:

TIPS

Life expectancy is exploding, particularly for our clientele.

Warning – Social Security has its own language.

DECIDING WHEN TO BEGIN TAKING SOCIAL SECURITY BENEFITS IS AN IMPORTANT AND MULTIFACETED CONSIDERATION that should be factored into each individual’s broader retirement plan.  In order for us to help you decide how and when to take your Social Security, we must go over some basic Social Security concepts.  In the following memo, we review key details to consider in your Social Security decision-making.  Your Social Security strategy must be integrated with your investment plan and your overall retirement plan.

Social Security Benefits for Divorced People

When Should I Take My Benefits ?

OVERVIEW:  As an Ex-Spouse you may be entitled to your individual benefits and spousal or survivor benefits.  We will review both sets to decide what decision you should make.

TIPS

You must have worked for 40 Quarters to be eligible to receive benefits.

Planning Tip:  Social Security aims to encourage you to collect your benefits at Full Retirement Age, known as FRA in Social Security Language.

Your monthly benefit, known as your Primary Insurance Amount (PIA), is calculated based on your highest 35 years of employment.

The Social Security Administration (SSA) uses your highest 35 years of employment to arrive at your Average Indexed Monthly Earnings (AIME).  For more information, please visit www.ssa.gov to get your Social Security statement. If you continue working after reaching FRA, the SSA will automatically recalculate your benefits each year you continue to work. If your current income is greater than any of your previously calculated “highest 35 years”, your benefits will be adjusted upward. The increase generally will be made in October of the following year, but will be retroactive to January 1.  In addition, Social Security retirement benefits are automatically modified each year for inflation, known as Cost-Of-Living Adjustments (COLAs).

TIP

COLAs have averaged between 1% and 2% over the past 10 years.  Over the last 90 years inflation has averaged about 3% per year.

TIP

Benefits are reduced by about 6% per year for each year you receive benefits prior to your full retirement age (FRA).

COLLECTING BENEFITS EARLIER THEN FRA

While your full benefit, your PIA, is payable at your FRA, you are entitled to  collect benefits as early as age 62. However, if you choose to collect early, you will permanently reduce the size of your benefits. Your benefits will not be adjusted upward when you attain FRA. The amount of your reduction will depend on two factors—your FRA and the number of months before it that you start collecting. If you begin taking benefits on your 62^nd birthday, you are subject to the maximum reduction. That reduction will be smaller for each month you delay benefits after age 62 but prior to reaching FRA.

COLLECTION AGE IMPACTS BENEFIT AMOUNT

WORKING WHILE COLLECTING BENEFITS PRIOR TO FULL RETIREMENT AGE

Social Security benefits are intended to supplement retirement income.  There are consequences to collecting your benefits early if you are not retired and are still receiving wages. If you choose to collect benefits prior to FRA, you are subject to an Earnings Test every year until you reach FRA.

If your earnings exceed certain thresholds, the SSA will Withhold part or all of your benefits. The earnings test for individual and survivor benefits looks only at the salary or wages of the individual collecting early benefits. It does not consider any other type of income, nor does it

consider the salary or wages of a spouse. However, the test on spousal benefits (see memo on Married Couples) may take into account both spouses' wages if both are under age 62.

TIP

Withheld benefits are different and in addition to reduced benefits.

The Withholding on Social Security before FRA eliminates Benefits for many Employees.

WITHHELD BENEFITS

Benefits withheld by the SSA due to early collection will not be refunded. However, your benefits will be adjusted at FRA to account for the benefits that were withheld.  For example, if your FRA was 66 and you began collecting benefits at age 62, the SSA would have reduced your benefit by 25%. Assuming you returned to work at age 64; the SSA may have withheld two years’ worth of benefits by the time you reached FRA. The SSA would then lessen your 25% reduction to give you credit for the two years of lost benefits. Your new reduction would be as if you started collecting benefits at age 64 (13.3% reduction) rather than age 62.

2019 RETIREMENT EARNINGS LIMIT

Under FRA

• $1 of benefits withheld for every $2 in earnings above $17,640
• Earned $27,640 – $17,640 = $10,000 over x 1/2 = $5,000 withheld

Year individual reaches FRA

• $1 of benefits withheld for every $3 in earnings above $46,920 for months prior to attaining FRA
• Earned $56,920 – $46,920 = $10,000 over x 1/3 = $3,333 withheld

Month individual reaches FRA

• Unlimited

WAITING TO COLLECT BENEFITS

If you elect to defer collecting benefits beyond your FRA, the SSA will give you a delayed retirement credit (DRC) for every month you defer between FRA and age 70, the age at which

your benefits max out. This increase will be in addition to the annual COLA, if applicable. Depending on your year of birth, your increase will amount to 7% to 8% annually

TIP

When collecting before FRA, always consider the net (after-tax) benefits you will receive. A working spouse may cause more of your benefits to be taxed, and at potentially higher tax rates.

TAXATION OF BENEFITS

You should plan on income taxes on Social Security Benefits.  Individuals with high total incomes must include up to 85% of their benefits as income for federal income tax purposes. Special step-rate “thresholds” on Provisional Income determine the amount which you may be taxed. We should plan as if you will pay income tax on your benefits when making the decision.

COLLECTING SPOUSAL BENEFITS

If you are married to an individual who is collecting Social Security retirement benefits and you are at least age 62, you may be entitled to collect spousal benefits.  Spousal benefits will be equal to 50% of your spouse’s PIA if you collect benefits at FRA or later. If you are entitled to your own benefits and your PIA is less than 50% of your spouse’s PIA, spousal benefits will be paid in addition to your own. These combined benefits will equal 50% of your spouse’s PIA, assuming you start collecting both benefits at FRA or later.

COLLECTING SPOUSAL BENEFITS EARLY

If you collect spousal benefits prior to your FRA, your adjusted spousal benefits (amounts in addition to your own benefits) will be reduced. Your spouse’s collection age has no impact on your spousal benefits.

COLLECTING SURVIVOR BENEFITS

If you have been married for at least nine months and your spouse passes away, you may be entitled to survivor benefits. If you remarry before age 60, survivor benefits will not be paid unless the subsequent marriage ends.  Remarriage after age 60 does not prevent or stop entitlement to benefits. The amount of your survivor benefits depends on when your spouse began taking benefits. If the death occurs prior to your spouse collecting benefits, your survivor benefits will equal 100% of your spouse’s PIA when you attain FRA. If your spouse was collecting benefits at the time of his or her death, your survivor benefits will equal his or her actual benefits, assuming you have attained FRA.  The only exception is if he or she was collecting benefits that were reduced more than 17.5%. In that case, your survivor benefits will be 82.5% of your spouse’s PIA. The survivor benefits, if higher, will replace your other benefits.

COLLECTING SURVIVOR BENEFITS EARLY

You can collect survivor benefits as young as age 60. If you collect at age 60, your survivor benefits will be reduced by up to 28.5% .

CHOOSING BETWEEN BENEFITS

If you are entitled to both individual and survivor benefits, you can choose to begin collecting one and then switch to the other at a later date. It is possible to collect reduced survivor benefits at age 60, and then convert to your own unreduced benefits at FRA or later. You also have the

option to collect individual benefits and then switch to survivor benefits.

SPOUSAL AND SURVIVOR BENEFITS AFTER DIVORCE

If you are not married but previously had been married to the same individual for at least 10 years, you may be entitled to collect spousal and/or survivor benefits based on your ex-spouse’s

work history, as described earlier. To collect spousal benefits you and your ex-spouse must be at least 62. You are not required to wait until your ex-spouse files for benefits.

What decision should you make ?  Please contact us for an appointment.

Social Security Benefits for Widows and Widowers

When Should I Take My Benefits ?

OVERVIEW:  As a widow or widower you may be entitled to your individual benefits and survivor benefits.  We will review both sets to decide what decision you should make.

TIPS

You must have worked for 40 Quarters to be eligible to receive benefits.

Planning Tip:  Social Security aims to encourage you to collect your benefits at Full Retirement Age, known as FRA in Social Security Language.

Your monthly benefit, known as your Primary Insurance Amount (PIA), is calculated based on your highest 35 years of employment.

The Social Security Administration (SSA) uses your highest 35 years of employment to arrive at your Average Indexed Monthly Earnings (AIME).  For more information, please visit www.ssa.gov to get your Social Security statement. If you continue working after reaching FRA, the SSA will automatically recalculate your benefits each year you continue to work. If your current income is greater than any of your previously calculated “highest 35 years”, your benefits will be adjusted upward. The increase generally will be made in October of the following year, but will be retroactive to January 1.  In addition, Social Security retirement benefits are automatically modified each year for inflation, known as Cost-Of-Living Adjustments (COLAs).

TIP

COLAs have averaged between 1% and 2% over the past 10 years.  Over the last 90 years inflation has averaged about 3% per year.

TIP

Benefits are reduced by about 6% per year for each year you receive benefits prior to your full retirement age (FRA).

COLLECTING BENEFITS EARLIER THEN FRA

While your full benefit, your PIA, is payable at your FRA, you are entitled to  collect benefits as early as age 62. However, if you choose to collect early, you will permanently reduce the size of your benefits. Your benefits will not be adjusted upward when you attain FRA. The amount of your reduction will depend on two factors—your FRA and the number of months before it that you start collecting. If you begin taking benefits on your 62^nd birthday, you are subject to the maximum reduction. That reduction will be smaller for each month you delay benefits after age 62 but prior to reaching FRA.

COLLECTION AGE IMPACTS BENEFIT AMOUNT

WORKING WHILE COLLECTING BENEFITS PRIOR TO FULL RETIREMENT AGE

Social Security benefits are intended to supplement retirement income.  There are consequences to collecting your benefits early if you are not retired and are still receiving wages. If you choose to collect benefits prior to FRA, you are subject to an Earnings Test every year until you reach FRA.

If your earnings exceed certain thresholds, the SSA will Withhold part or all of your benefits. The earnings test for individual and survivor benefits looks only at the salary or wages of the individual collecting early benefits. It does not consider any other type of income, nor does it

consider the salary or wages of a spouse. However, the test on spousal benefits (see memo on Married Couples) may take into account both spouses' wages if both are under age 62.

TIP

Withheld benefits are different and in addition to reduced benefits.

The Withholding on Social Security before FRA eliminates Benefits for many Employees.

WITHHELD BENEFITS

Benefits withheld by the SSA due to early collection will not be refunded. However, your benefits will be adjusted at FRA to account for the benefits that were withheld.  For example, if your FRA was 66 and you began collecting benefits at age 62, the SSA would have reduced your benefit by 25%. Assuming you returned to work at age 64; the SSA may have withheld two years’ worth of benefits by the time you reached FRA. The SSA would then lessen your 25% reduction to give you credit for the two years of lost benefits. Your new reduction would be as if you started collecting benefits at age 64 (13.3% reduction) rather than age 62.

2019 RETIREMENT EARNINGS LIMIT

Under FRA

• $1 of benefits withheld for every $2 in earnings above $17,640
• Earned $27,640 – $17,640 = $10,000 over x 1/2 = $5,000 withheld

Year individual reaches FRA

• $1 of benefits withheld for every $3 in earnings above $46,920 for months prior to attaining FRA
• Earned $56,920 – $46,920 = $10,000 over x 1/3 = $3,333 withheld

Month individual reaches FRA

• Unlimited

WAITING TO COLLECT BENEFITS

If you elect to defer collecting benefits beyond your FRA, the SSA will give you a delayed retirement credit (DRC) for every month you defer between FRA and age 70, the age at which

your benefits max out. This increase will be in addition to the annual COLA, if applicable. Depending on your year of birth, your increase will amount to 7% to 8% annually.

TIP

When collecting before FRA, always consider the net (after-tax) benefits you will receive. A working spouse may cause more of your benefits to be taxed, and at potentially higher tax rates.

TAXATION OF BENEFITS

You should plan on income taxes on Social Security Benefits.  Individuals with high total incomes must include up to 85% of their benefits as income for federal income tax purposes. Special step-rate “thresholds” on Provisional Income determine the amount which you may be taxed. We should plan as if you will pay income tax on your benefits when making the decision.

COLLECTING SURVIVOR BENEFITS

If you have been married for at least nine months and your spouse passes away, you may be entitled to survivor benefits. If you remarry before age 60, survivor benefits will not be paid unless the subsequent marriage ends.  Remarriage after age 60 does not prevent or stop entitlement to benefits. The amount of your survivor benefits depends on when your spouse began taking benefits. If the death occurs prior to your spouse collecting benefits, your survivor benefits will equal 100% of your spouse’s PIA when you attain FRA. If your spouse was collecting benefits at the time of his or her death, your survivor benefits will equal his or her actual benefits, assuming you have attained FRA.  The only exception is if he or she was collecting benefits that were reduced more than 17.5%. In that case, your survivor benefits will be 82.5% of your spouse’s PIA. The survivor benefits, if higher, will replace your other benefits.

COLLECTING SURVIVOR BENEFITS EARLY

You can collect survivor benefits as young as age 60. If you collect at age 60, your survivor benefits will be reduced by up to 28.5% .

CHOOSING BETWEEN BENEFITS

If you are entitled to both individual and survivor benefits, you can choose to begin collecting one and then switch to the other at a later date. It is possible to collect reduced survivor benefits at age 60, and then convert to your own unreduced benefits at FRA or later. You also have the

option to collect individual benefits and then switch to survivor benefits.

What decision should you make ? Please contact us for an appointment.

Social Security Benefits for Singles

When Should I Take My Benefits ?

Individual Collection Decision

COLLECTING BENEFITS AT FULL RETIREMENT AGE

Your benefits, known as your Primary Insurance Amount (PIA) is the monthly benefit for which you are eligible at your full retirement age (FRA). FRA varies based on year of birth. Originally age 65, the federal government has increased FRA for anyone born after 1937 in recognition of longer life expectancies.  Life expectancy in 1937 was less than 65.  Today, it is about 78.  We expect our clients to live even longer.

TIPS

You must have worked for 40 Quarters to be eligible to receive benefits.

Social Security aims to encourage you to collect your benefits at Full Retirement Age, known as FRA in Social Security Language.

Your monthly benefit, known as your Primary Insurance Amount (PIA), is calculated based on your highest 35 years of employment.

The Social Security Administration (SSA) uses your highest 35 years of employment to arrive at your Average Indexed Monthly Earnings (AIME).  For more information, please visit www.ssa.gov to get your Social Security statement. If you continue working after reaching FRA, the SSA will automatically recalculate your benefits each year you continue to work. If your current income is greater than any of your previously calculated “highest 35 years”, your benefits will be adjusted upward. The increase generally will be made in October of the following year, but will be retroactive to January 1.  In addition, Social Security retirement benefits are automatically modified each year for inflation, known as Cost-Of-Living Adjustments (COLAs).

TIP

COLAs have averaged between 1% and 2% over the past 10 years.  Over the last 90 years inflation has averaged about 3% per year.

TIP

Benefits are reduced by about 6% per year for each year you receive benefits prior to your full retirement age (FRA).

COLLECTING BENEFITS EARLIER THEN FRA

While your full benefit, your PIA, is payable at your FRA, you are entitled to  collect benefits as early as age 62. However, if you choose to collect early, you will permanently reduce the size of your benefits. Your benefits will not be adjusted upward when you attain FRA. The amount of your reduction will depend on two factors—your FRA and the number of months before it that you start collecting. If you begin taking benefits on your 62^nd birthday, you are subject to the maximum reduction. That reduction will be smaller for each month you delay benefits after age 62 but prior to reaching FRA.

COLLECTION AGE IMPACTS BENEFIT AMOUNT

WORKING WHILE COLLECTING BENEFITS PRIOR TO FULL RETIREMENT AGE

Social Security benefits are intended to supplement retirement income.  There are consequences to collecting your benefits early if you are not retired and are still receiving wages. If you choose to collect benefits prior to FRA, you are subject to an Earnings Test every year until you reach FRA.

If your earnings exceed certain thresholds, the SSA will Withhold part or all of your benefits. The earnings test for individual and survivor benefits looks only at the salary or wages of the individual collecting early benefits. It does not consider any other type of income, nor does it consider the salary or wages of a spouse. However, the test on spousal benefits (see memo on Married Couples) may take into account both spouses' wages if both are under age 62.

TIP

Withheld benefits are different and in addition to reduced benefits.

The Withholding on Social Security before FRA eliminates Benefits for many Employees.

WITHHELD BENEFITS

Benefits withheld by the SSA due to early collection will not be refunded. However, your benefits will be adjusted at FRA to account for the benefits that were withheld.  For example, if your FRA was 66 and you began collecting benefits at age 62, the SSA would have reduced your benefit by 25%. Assuming you returned to work at age 64; the SSA may have withheld two years’ worth of benefits by the time you reached FRA. The SSA would then lessen your 25% reduction to give you credit for the two years of lost benefits. Your new reduction would be as if you started collecting benefits at age 64 (13.3% reduction) rather than age 62.

2019 RETIREMENT EARNINGS LIMIT

Under FRA

• $1 of benefits withheld for every $2 in earnings above $17,640
• Earned $27,640 – $17,640 = $10,000 over x 1/2 = $5,000 withheld

Year individual reaches FRA

• $1 of benefits withheld for every $3 in earnings above $46,920 for months prior to attaining FRA
• Earned $56,920 – $46,920 = $10,000 over x 1/3 = $3,333 withheld

Month individual reaches FRA

• Unlimited

WAITING TO COLLECT BENEFITS

If you elect to defer collecting benefits beyond your FRA, the SSA will give you a delayed retirement credit (DRC) for every month you defer between FRA and age 70, the age at which

your benefits max out. This increase will be in addition to the annual COLA, if applicable. Depending on your year of birth, your increase will amount to 7% to 8% annually.

TIP

The 8% per year increase is greater than the expected return from most investments.  In addition, increase applies to Survivor Benefits.

TIP

When collecting before FRA, always consider the net (after-tax) benefits you will receive. A working spouse may cause more of your benefits to be taxed, and at potentially higher tax rates.

TAXATION OF BENEFITS

You should plan on income taxes on Social Security Benefits.  Individuals with high total incomes must include up to 85% of their benefits as income for federal income tax purposes. Special step-rate “thresholds” on Provisional Income determine the amount which you may be taxed. We should plan as if you will pay income tax on your benefits when making the decision.

Social Security Benefits for Married Couples

When Should We Take Our Benefits ?

OVERVIEW:  Each spouse is entitled to their individual benefits and spousal benefits.  We have to review your individual benefits first.

Individual Collection Decision

COLLECTING BENEFITS AT FULL RETIREMENT AGE

Your benefits, known as your Primary Insurance Amount (PIA) is the monthly benefit for which you are eligible at your full retirement age (FRA). FRA varies based on year of birth. Originally age 65, the federal government has increased FRA for anyone born after 1937 in recognition of longer life expectancies.  Life expectancy in 1937 was less than 65.  Today, it is about 78.  We expect our clients to live even longer.

TIPS

You must have worked for 40 Quarters to be eligible to receive benefits.

Social Security aims to encourage you to collect your benefits at Full Retirement Age, known as FRA in Social Security Language.

Your monthly benefit, known as your Primary Insurance Amount (PIA), is calculated based on your highest 35 years ofemployment

The Social Security Administration (SSA) uses your highest 35 years of employment to arrive at your Average Indexed Monthly Earnings (AIME).  For more information, please visit www.ssa.gov to get your Social Security statement. If you continue working after reaching FRA, the SSA will automatically recalculate your benefits each year you continue to work. If your current income is greater than any of your previously calculated “highest 35 years”, your benefits will be adjusted upward. The increase generally will be made in October of the following year, but will be retroactive to January 1.  In addition, Social Security retirement benefits are automatically modified each year for inflation, known as Cost-Of-Living Adjustments (COLAs).

TIP

COLAs have averaged between 1% and 2% over the past 10 years.  Over the last 90 years inflation has averaged about 3% per year.

TIP

Benefits are reduced by about 6% per year for each year you receive benefits prior to your full retirement age (FRA).

COLLECTING BENEFITS EARLIER THEN FRA

While your full benefit, your PIA, is payable at your FRA, you are entitled to  collect benefits as early as age 62. However, if you choose to collect early, you will permanently reduce the size of your benefits. Your benefits will not be adjusted upward when you attain FRA. The amount of your reduction will depend on two factors—your FRA and the number of months before it that you start collecting. If you begin taking benefits on your 62^nd birthday, you are subject to the maximum reduction. That reduction will be smaller for each month you delay benefits after age 62 but prior to reaching FRA.

COLLECTION AGE IMPACTS BENEFIT AMOUNT

WORKING WHILE COLLECTING BENEFITS PRIOR TO FULL RETIREMENT AGE

Social Security benefits are intended to supplement retirement income.  There are consequences to collecting your benefits early if you are not retired and are still receiving wages. If you choose to collect benefits prior to FRA, you are subject to an Earnings Test every year until you reach FRA.

If your earnings exceed certain thresholds, the SSA will Withhold part or all of your benefits. The earnings test for individual and survivor benefits looks only at the salary or wages of the individual collecting early benefits. It does not consider any other type of income, nor does it consider the salary or wages of a spouse. However, the test on spousal benefits (see memo on Married Couples) may take into account both spouses' wages if both are under age 62.

TIP

Withheld benefits are different and in addition to reduced benefits.

The Withholding on Social Security before FRA eliminates Benefits for many Employees.

WITHHELD BENEFITS

Benefits withheld by the SSA due to early collection will not be refunded. However, your benefits will be adjusted at FRA to account for the benefits that were withheld.  For example, if your FRA was 66 and you began collecting benefits at age 62, the SSA would have reduced your benefit by 25%. Assuming you returned to work at age 64; the SSA may have withheld two years’ worth of benefits by the time you reached FRA. The SSA would then lessen your 25% reduction to give you credit for the two years of lost benefits. Your new reduction would be as if you started collecting benefits at age 64 (13.3% reduction) rather than age 62.

2019 RETIREMENT EARNINGS LIMIT

Under FRA

• $1 of benefits withheld for every $2 in earnings above $17,640
• Earned $27,640 – $17,640 = $10,000 over x 1/2 = $5,000 withheld

Year individual reaches FRA

• $1 of benefits withheld for every $3 in earnings above $46,920 for months prior to attaining FRA
• Earned $56,920 – $46,920 = $10,000 over x 1/3 = $3,333 withheld

Month individual reaches FRA

• Unlimited

WAITING TO COLLECT BENEFITS

If you elect to defer collecting benefits beyond your FRA, the SSA will give you a delayed retirement credit (DRC) for every month you defer between FRA and age 70, the age at which

your benefits max out. This increase will be in addition to the annual COLA, if applicable. Depending on your year of birth, your increase will amount to 7% to 8% annually.

TIP

The 8% per year increase is greater than the expected return from most investments.  In addition, increase applies to Survivor Benefits.

TIP

When collecting before FRA, always consider the net (after-tax) benefits you will receive. A working spouse may cause more of your benefits to be taxed, and at potentially higher tax rates.

TAXATION OF BENEFITS

You should plan on income taxes on Social Security Benefits.  Individuals with high total incomes must include up to 85% of their benefits as income for federal income tax purposes. Special step-rate “thresholds” on Provisional Income determine the amount which you may be taxed. We should plan as if you will pay income tax on your benefits when making the decision.

Spousal Collection Decision

COLLECTING SPOUSAL BENEFITS

If you are married to an individual who is collecting Social Security retirement benefits and you are at least age 62, you may be entitled to collect spousal benefits.  Spousal benefits will be equal to 50% of your spouse’s PIA if you collect benefits at FRA or later. If you are entitled to your own benefits and your PIA is less than 50% of your spouse’s PIA, spousal benefits will be paid in addition to your own. These combined benefits will equal 50% of your spouse’s PIA, assuming you start collecting both benefits at FRA or later.

TIP

Consider collecting your individual benefits first, then spousal benefits once your spouse starts collecting benefits.

COLLECT  MORE INCOME BY COMBINING SPOUSAL

AND INDIVIDUAL BENEFITS

COLLECTING SPOUSAL BENEFITS EARLY

If you collect spousal benefits prior to your FRA, your adjusted spousal benefits (amounts in addition to your own benefits) will be reduced. Your spouse’s collection age has no impact on your spousal benefits.

WAITING TO COLLECT SPOUSAL BENEFITS

Unlike your own benefits, spousal benefits are not subject to guaranteed annual increases if you defer collecting them beyond FRA. Spousal benefits are at their maximum when you reach FRA, so there is no advantage to be gained by deferring collection.

COLLECTING SURVIVOR BENEFITS

If you have been married for at least nine months and your spouse passes away, you may be entitled to survivor benefits. If you remarry before age 60, survivor benefits will not be paid unless the subsequent marriage ends. Remarriage after age 60 does not prevent or stop entitlement to benefits. The amount of your survivor benefits depends on when  your spouse began taking benefits. If the death occurs prior to your spouse collecting benefits, your survivor benefits will equal 100% of your spouse’s PIA when you attain FRA. If your spouse was collecting benefits at the time of his or her death, your survivor benefits will equal his or her actual benefits, assuming you have attained FRA. The only exception is if he or she was collecting benefits that were reduced more than 17.5%. In that case, your survivor benefits will be 82.5% of your spouse’s PIA. The survivor benefits, if higher, will replace your other benefits

COLLECTING SURVIVOR BENEFITS EARLY

You can collect survivor benefits as young as age 60. If you collect at age 60, your survivor benefits will be reduced by up to 28.5%.

CHOOSING BETWEEN BENEFITS

If you are entitled to both individual and survivor benefits, you can choose to begin collecting one and then switch to the other at a later date. It is possible to collect reduced survivor benefits at age 60, and then convert to your own unreduced benefits at FRA or later. You also have the option to collect individual benefits and then switch to survivor benefits.