What to know about taking social security in the event of a pandemic

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If you apply for benefits before retirement age and continue working, Social Security deducts part of your benefits if your income exceeds certain amounts, an amount known as an exempt amount. (For 2020, the exempt amount is $ 18,240; for those who reach full retirement this year, the exempt amount is $ 48,600, applied only to earnings in the months preceding the month of full retirement.)

Social security deducts $ 1 in benefits for every $ 2 of earnings in excess of the exempt amount. But the reduced benefits are not lost permanently. When you reach your retirement age, your monthly benefit will be increased permanently to take into account the months during which the benefits were withheld.

Married couples have an important additional option to increase their family allowance: one spouse claims early while the other delays. Take a couple where one of the spouses is 66 and the other is 63. The older spouse has a full retirement benefit of $ 2,400, and the younger spouse can expect a full benefit of $ 1,500.

Meyer calculates that if the two deposit now rather than at full retirement age, they forfeit $ 59,000 in lifetime benefits and $ 275,000 compared to a delay at age 70. but the older, higher-income spouse delays the start of benefits until age 70, he will have $ 170,000 more in benefits than if they both start immediately.

This question underlines an important caveat accompanying Mr. Meyer’s projections, which assume a lifespan of 90: Not only will your mileage vary – it certainly will. Financial advisers regularly illustrate the results assuming a long life as a way to test the retirement plans they develop.

According to the Society of Actuaries, men who reach age 65 are 33% likely to live to age 90 and women 44%. And for married couples, there is a 63% chance that a spouse will live to be at least 90 years old. Yet a recent study by the company found that half of us wrongly estimate our life expectancy of five years or more, with 23% overestimating it and 28% underestimating it.

These figures illustrate the classic argument of the value of social security as insurance against the survival of our financial resources. But the challenges of the pandemic economy can reverse this argument.

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