Do not apply for social security benefits if you cannot answer these 3 questions


Deciding when to apply for social security benefits is one of the most important choices you will make. If you plan to start your checks now because you are ready to retire or because the coronavirus has affected your ability to continue working, you need to make sure that you are really ready. And to do this, you must first answer three key questions.

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1. How does your age at the time of filing affect the amount of your benefits?

Each worker entitled to social security has a standard benefit amount, but you will only receive this amount exactly if you retire at full retirement age (FRA), which is between 66 and 67 years old. depending on your year of birth. But many workers choose to retire before or after their own.

When you start your services before FRA, you are subject to a 5/9 early deposit penalty of 1% per month for each of the first 36 months. If you apply earlier, each previous month will incur an additional 5/12 penalty of 1%. These small numbers add up, so those who retire at 62 with a retirement age of 67 would see a 30% reduction in their monthly check.

Wait until after the FRA earns delayed retirement credits instead. These increase monthly benefits by 2/3 of 1% for each month of waiting, which corresponds to an increase of 8% for each year of waiting, up to 70 years of age.

Social security is designed so that these penalties or credits equalize the lifetime amount of benefits, no matter when someone claims them. But this is based on an actuarial projected life; you could die earlier or live longer. You will need to determine whether you think you will be living above the break-even point, or whether you prefer more modest benefits provided earlier, when deciding what is best for you.

2. How are your benefits calculated?

It is important to understand the formula for social security benefits, as it can have an impact when you decide to leave the workforce. The formula entitles you to a percentage of your average indexed monthly salary (AIME), which is calculated by first adjusting your salary over your career according to inflation, then by calculating your average monthly salary over 35 years where your salary was highest.

When your average is determined, 35 is always the magic number used in the calculation, no matter how many years you actually work. If you work too few years and don’t have 420 months of salary to account for, some months of salary of $ 0 lower this average. But if you choose to keep your job longer and earn more now than in the past (after adjusting for inflation), your higher monthly earnings will be included in your average, replacing the months when you were earning less and increasing your benefits.

Once you understand this, you can decide if keeping the job longer (if you can) is a smart decision to increase your benefits.

3. Are you entitled to spouse or survivor benefits?

If you are able to claim benefits on your spouse’s work file, this could result in a higher check if your spouse earned more than you. You can take advantage of these benefits if you are currently married, but also if you are divorced after a marriage of at least 10 years.

While you can’t split and get both your own benefits and survivor or spouse’s benefits, you can (and should) work with your spouse to decide on a common Social Security claim strategy to maximize them.

And even if you can claim spousal benefits online, you cannot claim your survivor benefits online. Up to two-thirds of workers do not realize that divorced people may be eligible for survivor benefits, and they could leave a lot of money on the table.

The answers to these questions can help you decide when to apply for benefits

The decision on when to apply for benefits irrevocably affects the amount of monthly and lifetime income you receive from the Social Security Administration. Since these benefits are such an important source of funding for most retirees, it’s worth understanding how the program works and making sure you make the right claim choice.


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