Enrolling in Social Security is a significant decision. There are various elements that affect how much money you receive, and you must understand them if you wish to receive the most amount feasible.
If you were born in 1960 or earlier, you may be thinking of signing up for Social Security in 2022 is the proper moment. Here are three questions to ponder to assist you in making your decision.
1. What will your age be in 2022?
The size of your benefit checks is determined by your age and your income history during your working years. The government allocates a full retirement age (FRA) to each individual depending on their birth year. Yours is between 66 and 67 years old. If you wait until your FRA to enroll, you will receive the standard benefit to which you are entitled based on your work history.
However, you can enroll as early as age 62 if you like. The drawback is that each month you seek benefits while covered by your FRA reduces your monthly checks slightly. Someone with an FRA of 67 who claims that at the age of 62 receives just 70% of their maximum benefit per check, whereas someone with an FRA of 66 receives 75% per check if they sign up immediately upon becoming eligible.
You may also elect to delay benefits beyond your FRA, in which case your monthly checks would increase somewhat until you achieve the maximum benefit at age 70. This equates to 124 percent of your full benefit per check if your FRA is 67, or 132 percent of your full benefit per check if your FRA is 66.
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There is no benefit to postponing until age 70, so if you will reach this age in 2022, you should sign up immediately. However, if you are under the age of 70, you have a choice.
Deferring benefits only makes sense if you anticipate living into your 80s or beyond. In this scenario, waiting to sign up will likely net you more money in the long run than signing up early. However, people with health problems who feel they will not live that long often receive more from Social Security if they enroll sooner.
Additionally, deferring benefits is not always an option. If you require assistance with paying your obligations right now, you may be required to enroll in 2022.
2. Is it possible for the government to reclaim some of your benefits?
There are two primary ways for individuals to forfeit a portion of their Social Security payout to the government. The Social Security Earnings Test is the first. Individuals who continue to work while receiving Social Security benefits under their FRA may run into this.
If you earn less than your FRA for the entire year, the government will deduct $1 from your Social Security benefits for every $2 earned above $19,560 in 2022. If you reach your FRA in 2022, you will forfeit $1 for every $3 earned over $51,960 before your birthday.
The good news is that money does not vanish in perpetuity. When you attain FRA, the government adjusts your benefits to account for previously withheld funds. As a result, future checks will be more substantial.
However, they will be less than they would have been if you had deferred payments until your FRA from the start. If you believe the Earnings Test may cause you difficulty, you may be better off deferring benefits until you either quit your work or attain your FRA.
The other way benefits can be lost is through taxation. That’s beyond the subject of this post, but if you’re curious about how the federal and state governments tax Social Security benefits, here’s a look. If you fear you may owe benefit taxes, you may also wish to delay benefits until you are completely retired and your income is reduced.
3. What effect would your choice have on your spouse?
Married couples can receive either their own Social Security benefit or a spousal benefit if they have worked long enough to qualify. This is up to 50% of the benefit received by their partner at their FRA. Not only does signing up early diminish your personal benefits, but it also affects the spousal benefits that your partner is eligible for. Regrettably, deferring benefits beyond your FRA has no effect on your partner’s checks.
Coordination with your spouse is critical to get the maximum amount of household benefits. Occasionally, this entails having one individual sign up early. When one partner earns much more than the other throughout the course of their lives, it is more critical for the higher earner to defer. Occasionally, it is advantageous for the lesser earner to enroll immediately.
Their benefit might supplement the couple’s income, allowing the higher earner to defer. Then, when the higher earner enrolls, the Social Security Administration will automatically enroll the lesser earner in a spousal benefit if the value of the benefit exceeds what they qualify for on their own. This can result in the household earning more money overall.
So, what are your options?
In the end, the decision to enroll in Social Security in 2022 is a personal one. If you’re considering it, make sure you understand how the criteria listed above may affect the amount of money you receive from the program. And if you’re not convinced that 2022 is the best year to join, defer your decision for a year and reconsider in 2023.
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The $17,166 Social Security Benefit Majority of Retirees Overlook
If you’re like the majority of Americans, you’re falling behind on retirement savings by a few years (or more). However, a few little-known “Social Security secrets” may assist assure that your retirement income is increased.
For instance, one simple method might earn you an additional $17,166 every year! Once you’ve figured out how to optimize your Social Security benefits, we believe you’ll be able to retire with the confidence and peace of mind that we all seek.
