How to Make the Most of Social Security
by Laurence Dresner, ChFC
April is Social Security month. What comes to mind when you think about how and when to claim your benefits? If you draw a blank, you’re not alone. After all, the rules can be confusing. Yet, no matter when you will be retiring, it’s important to understand the basics.
Here are some basics to help you begin to understand social security and plan ahead for the retirement that works best for you.
To understand how social security works and to get further details, go to www.ssa.gov.
To Be Eligible
You must earn at least 40 “credits.” (Each credit is equal to $1,320.) You can earn up to four per year, which you likely did in 2018 if you earned over $5,280.
How Your Benefit Will Be Determined
Your benefit amount will be based on your highest 35 years of earnings. If you retire having worked fewer than 35 years, the years for which you had no earnings will be factored in as zero.
When to Claim Benefits
You can claim your Social Security benefits when you reach your Full Retirement Age (which is determined based on the year you were born), or you can choose to wait. Each year you wait, your benefit amount will go up by 8%, until age 70, after which there will be no additional benefit increase.
The earliest you can claim is at age 62. However, you need to know that claiming at any time before your Full Retirement Age will reduce the amount of your benefit by about 25%. For example, if your monthly benefit would be $1,000 at your Full Retirement Age of 66, but you chose to claim benefits at age 62, your benefit would be reduced to $750. That reduction would be permanent.
Find out your Full Retirement Age.
Claiming While Working
If you receive Social Security benefits before your Full Retirement Age and continue working, for every $2 you make over the earnings limit (which in 2019 is $17,640), Social Security will deduct $1 from your payments. In the year you reach Full Retirement Age, the deduction is $1 for every $3 you make above the earnings limit ($46,920 in 2019). Once you reach your Full Retirement Age, your payments won’t be reduced, regardless of how much you earn.
If a portion of your payments are withheld because of your earnings, Social Security will recalculate your benefits to consider the months in which there were deductions.
Claiming as a Spouse
One spouse can take what is called a spousal benefit (which is worth up to 50% of the other spouse’s benefit) without affecting the other spouse’s benefit. If you are divorced, but your marriage lasted 10 or more years, you may be eligible to receive benefits on your ex-spouse’s record, though restrictions may apply.
A Good Idea for Clergy
Because of the complexity around ordained clergy’s dual tax status, it’s important to periodically make sure that your income is being reported correctly. You can review your earnings history on Social Security’s website (SSA.gov), where you’ll also find the steps to take if you need to make a correction.
Of course, SSA.gov is also the place to learn more about Social Security retirement and other benefits. We encourage you to check it out. The more you know, the better prepared for retirement you’ll be.
Laurence Dresner, ChFC, serves as a Financial Education Client Specialist at the Church Pension Group.