Social Security is a complicated program, with many ins and outs that require planning to get the biggest benefits possible. However t how to make the best decision for your situation.
1.) How much will I get from Social Security?
The most vital question about Social Security is sometimes difficult to calculate. The Social Security Administration requires about 10 years of work to gain eligibility, and to calculate benefits. It then looks at your 35 top-earning years, adjusting for inflation over the course of your career, to come up with an average indexed monthly earnings amount. A formula then produces the primary insurance amount on which your benefits are based. It sounds complicated, but with an experienced eye you can look deeper into this question.
2.) Does taking my benefits at a different time effect my monthly payments?
You first calculation is based upon taking benefits at the “full retirement age”, which is currently 66 for those eligible as of now. You’re allowed to take benefits as early as age 62 or as late as age 70. If you take benefits early, you’ll lose five-ninths of a percent for every month up to 36 months, and then five-twelfths of a percent beyond that. That equates to a 25% drop in benefits if you claim at age 62 versus 66. Meanwhile, waiting until after full retirement age earns you 8% larger benefit payments for each year you wait, up to a maximum of 32% at age 70.
3.) What if I still want to work and collect Social Security benefits?
If you have reached full retirement age, your employment status has no effect on your benefits. However, if you choose to take benefits early some of those benefits may be shrunk or taken away completely if you earn more than certain thresholds. Specifically, those who won’t turn 66 this year lose $1 in benefits for every $2 they earn above the 2014 limit of $15,480. It isn’t all bad, however. If you do not earn any benefits in a single month due to your other income, the SSA will boost your monthly income in later years to make up for the difference.
4.) What will happen if the program runs out of money?
According to the Social Security Trust Fund, money in the fund may run out in the year 2033. This is according to current laws, and doesn’t take into account future adjustments made by the government in taxes and payouts. However, even if the fund is depleted, Social Security tax funding will still pay over 75% of current scheduled benefits. While that may not be a pretty picture for some retirees, it is not as devastating as many people think.
5.) Why are there different strategies for making Social Security claims?
Experts argue about almost everything concerning Social Security, ranging from when you should file for your own benefits to the best ways that married couples can coordinate their Social Security to get the most from the program. Some use complex mathematical models, while others focus more on real-life experience and anecdotal evidence.
There’s no way to know in advance what the best strategy is, except in very limited cases. Precise calculations and models often turn out wrong for individual people. For some, it is not just about the amount of money they receive but also when they receive it. Because of that, there’s no alternative to looking closely at how Social Security works, perhaps with a second pair of educated and experienced eyes at your side.