May 15, 2018
Social Security Seminar Recap
We would like to express a big thank you to Bonnie Elgin for speaking at our Social Security seminar last week. We trust this was an enjoyable and educational experience to those in attendance. We also know many of you have questions about the structure of Social Security but were unable to attend.
After all, Social Security replaces approximately 40% of the average worker’s income in retirement. This is a big factor that can impact the long-term success of your retirement.
The following is a brief recap of key Social Security questions addressed by Bonnie:
What types of benefits are provided by Social Security:
The most commonly recognized benefits provided by Social Security are for retirement. However, Social Security also provides disability, survivor, and dependent benefits. We will be focusing primarily on retirement benefits for this recap.
How are my Social Security Retirement Benefits calculated?
You qualify for Social Security Retirement Benefits after you have worked a minimum of 10 years. However, your benefits are based on your 35 highest years of earnings (adjusted for inflation, until age 60). If you stop working before you have 35 years of earnings, Social Security will use $0 for each year without earnings in their calculation.
When can I collect Social Security Retirement Benefits?
You will often hear the term Full Retirement Age (FRA) when discussing Social Security. The timing of your FRA is based on your year of birth. For 1960 and later, your FRA is age 67. If you were born prior to 1960, you can find your FRA here.
Regardless of your FRA, you are permitted to collect Social Security Retirement Benefits anytime between age 62 and 70 (exceptions apply to surviving spouse). Benefits started between age 62 and FRA result in a lifetime reduction in your monthly benefits. Benefits started after FRA result in a lifetime increase in your monthly benefits.
How do I find my estimated Social Security Retirement Benefits?
Social Security provides your full work history, estimated benefits, and other tools on their website, www.ssa.gov. If you have never used this site before, we recommend you establish login credentials for a “my Social Security” account. This can be started by clicking “Sign In/Up” in the top right-hand corner of the homepage.
Can I work and collect Social Security Retirement Benefits simultaneously?
Yes! However, if you are under Full Retirement Age (FRA), you may incur a “penalty” for making too much money. The income limit for 2018 is $17,040. There is also a Monthly Earnings Test that could be used to avoid the penalty, but it can be used only once. There are no earned income restrictions or penalties if you are FRA or older.
Is Social Security Taxable?
Possibly. The taxation of Social Security is dependent on a calculation that includes your other sources of income – including continued employment, pensions, retirement account withdrawals, etc. If the calculation crosses certain thresholds, Social Security will be partially taxable. The maximum percentage of your Social Security income that could be taxable is 85%. This formula does not change as you get older. There is often a misconception that Social Security is not taxable after a certain age.
Do my Spouse’s Social Security Retirement Benefits impact my options?
You are eligible to collect the higher of your Social Security Retirement Benefits or 50% of your spouse’s benefits. Your spouse must file to collect their benefits before you can elect to receive 50% of their benefits. Your spouse’s benefits are not impacted if you collect based on their benefits. There used to be several “loopholes” with spousal benefit elections, but many of these strategies are no longer available.
How does divorce impact Spousal Social Security Retirement Benefits?
If you were married for at least 10 years and did not remarry prior to age 60, you are still eligible for the same spousal options explained in the previous question. You do not, however, need to wait until your former spouse starts their benefits. Your right to these benefits are also not impacted if your former spouse remarries. Your former spouse will receive no notification that you have elected to start Social Security Retirement Benefits based on their record.
Here’s the big question: When SHOULD you start your Social Security Retirement Benefits?
The answer to this question is not a simple one. The best answer for you may be different than the best answer for your neighbor. Social Security gives you the numbers. However, as Bonnie said during the seminar, “Social Security is not in the business of giving advice.” They will simply do what you tell them to do.
Our team at Serafini Financial Group is available to help you sort through the numbers, evaluate your personal situation, and develop a plan that is best for your specific retirement goals.
Please do not hesitate to contact us at 301-739-1500 to schedule an appointment.