Social Security Made Easy – Facts and Misconceptions
Social Security – FACTS
- You must have 40 credits for Social Security Benefits. There is a maximum of 4 credits annually, and there is one credit for every $1,470 in covered earnings.
- You are eligible for retirement at age 62. The following benefits are available:
- Partial Benefits are available from the age of 62 until the Full Retirement Age (FRA). (FRA is determined by your birthday). Benefits are reduced for each month taken before your FRA. Reduction is permanent.
- Full Benefits (known as Primary Insurance Amount (PIA)) are available on FRA.
- Full Benefits + Delayed Retirement Credits are available from FRA to 70.
- Your FRA Social Security Benefits are defined by the highest 35 years of earnings. The wage cap for 2021 is $142,800.
- Most full-time employment will reduce your Social Security Benefits (for people under FRA). Annual Earning Test determines whether Social Security benefits are reduced and how much.
- For married couples, consider Social Security Benefits as a joint venture. To maximize family benefits, include all available sources of benefits (Retirement, Spousal, Survival, and Disability).
- Your spouse (or divorced spouse) is entitled to Social Security Benefits (even if a spouse never worked). The maximum of spouse benefits is 50% of your PIA. The spouse will receive the highest of your OWN record or spouse benefits.
- There are Surviving Spouse (or ex-spouse) benefits. The maximum is 100% of deceased PIA.
- Public employees who have 40 Social Security credits and a Pension from a non-Social Security system will get reduced Social Security Benefits.
- Taxes on Social Security Benefits (SSB) are dependent on PROVISIONAL INCOME ( It equals Modified Adjusted Gross Income (MAGI) + one-half of SSB). Up to 50% or 85% of SSB are taxable if Provisional Income exceeds base amounts ($25,000 for Single and $32,000 for Married Couples).
Social Security – MISCONCEPTIONS
- Many people don’t know that it DOES MATTER when they claim the benefits. On average, the cost is about $120,000 per couple in lost benefits.
- There are MANY choices when you may file for Social Security Benefits, therefore don’t limit yourself to three Social Security choices at ages 62, 66, and 70.
- Many people think that if you begin Social Security, the system is locked. In reality, the new earning from work may change your record by updating the highest 35 years of your earnings.
- People are NOT familiar with RESTRICTED APPLICATION. It allows workers to file only for spousal benefits and wait to age 70 to draw their own benefits. You must have been born by January 1, 1954, to use Restricted Application.
- People don’t know that divorced spouses CAN COLLECT on an ex-spouse.
- People think that if you delay Social Security benefits until you are 70, your spouse will be entitled to 50% of the increased benefits. It is not the case, and the spouse benefits cannot exceed 50% of your Primary Insurance Amount (PIA).
- People who expect help from either Social Security or from Financial Advisors will be disappointed. Social Security is legally prohibited from providing advice, and they are just order takers. For most Financial Advisors, Social Security is just a secondary line of business.
- Most people don’t know that you CANNOT UNDO Social Security decisions. The exception is the adjustment done within the FIRST YEAR.
- Errors on your Social Security record are possible. Once discovered, you have three years, three months, and 15 days to correct them.
- The choice of the WRONG strategy may create substantial damage, and you may consider suspending the benefits or (in extreme cases) withdrawing the application entirely.