When To Apply For Social Security Retirement Benefits

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Nearly three out of five retirees can maximize their lifetime Social Security benefits by taking a payout at a very specific age.

When To Apply For Social Security Retirement Benefits

When To Apply For Social Security Retirement Benefits

In June 2023, the average retiree took home $1,837.29 in Social Security benefits, which translates to just over $22,000 a year. While that may not sound like a lot of money, it’s enough to keep nearly 15.4 million adults age 65 and older out of poverty each year. 

How And When To Apply For Social Security Benefits

For the vast majority of the program’s more than 49 million retirees, Social Security income is essential to make ends meet. This will likely also be true for the more than 100 million working Americans who will eventually receive Social Security benefits.

In other words, getting the most out of Social Security is of the utmost importance to retirees — and it all starts with understanding how your benefit is calculated.

More than half a dozen factors come into play to determine how much Social Security will pay you each month, as well as how much of your benefits you keep. For example, Social Security benefits may be taxable at the federal level and in 12 states, depending on how much you earn in a given year.

But when it boils down to it, only four elements are used to calculate how much Social Security will pay you each month during retirement: earnings history, work history, full retirement age, and eligibility age.

Securing Tomorrow: Navigating Social Security Retirement & Survivor Benefits

The first two factors, your earnings history and work history, are interconnected. The Social Security Administration takes into account your 35 years of highest earnings, adjusted for inflation, when calculating your monthly retirement pay. For each year less than 35 worked, $0 is averaged. That’s why it’s essential not only to earn as much as you can while you’re working, but also to work for at least 35 years if you have any hope of maximizing your Social Security check.

The third element is your full retirement age, which is determined by your year of birth. Using the retirement age chart, you can quickly determine how old you have to wait to receive 100% of your pension benefit. For example, anyone born in 1960 or later has a full retirement age of 67.

The fourth factor, and the one that can have the biggest impact on what Social Security will pay you each month, is your age at which you claim. Although eligible retirees have the option of receiving their benefits as early as age 62, they are encouraged to be patient. For every year an individual waits to claim a Social Security benefit in retirement, their pay can increase by up to 8% until age 69.

When To Apply For Social Security Retirement Benefits

As you can see from the table, claiming early can result in a permanent reduction in your monthly payment of 25% to 30% depending on your year of birth, while waiting until age 70 can increase your benefit by 24% to 32% above the amount you have . would receive at full retirement age.

Understanding Social Security

In 2021, nearly 3.2 million eligible beneficiaries opted in and began receiving Social Security payments. If we exclude disabled workers who were automatically converted to pensioners at full retirement age (66 years and 10 months in 2021), the percentage breakdown of claim age in 2021 was as follows: 

Note that the earliest possible age (62) was by far the most popular. In addition, many recipients began receiving payments between the ages of 65 and 66. According to Social Security’s 2022 Annual Statistical Supplement, 65% of the 47.29 million retirees receiving benefits in 2021 applied for a payment before reaching full retirement age. 

But a study by online financial planning company United Income suggests that many of these retirees made the wrong choice.

In 2019, United Income released a report that analyzed and extrapolated the claims decisions of approximately 20,000 retired workers using data from the University of Michigan Health and Retirement Study. Simply put, United Income looked at each claim decision to see if it was optimal—i.e. j. whether the individual made a choice that led to the highest

Role Of The Social Security

United Income found an almost perfect inversion between when retirees claimed their benefits and the age at which the optimal claim would be made. For example, according to the report, only 6.5% of the total number of applicants aged 62 and 63 made the optimal decision. Nevertheless, in 2021, almost 37% of all claims were made in these two age groups.

United Income, meanwhile, found that age 70 stood out as the clear best age to receive Social Security benefits. Based on this extrapolation, 57% of all claimants would make the optimal decision to wait until age 70 to receive a Social Security check. The next “best” age was 67, which was optimal for about 10% of applicants.

Statistically speaking, age 70 is the best age to start receiving Social Security benefits — and it’s not even close. However, we continue to see a relatively small percentage of claimants who are willing to wait until age 70 to get paid. What does it give?

When To Apply For Social Security Retirement Benefits

One possible reason why so many seniors choose to take their paychecks before reaching full retirement age is the persistent misconception that Social Security could become insolvent or stop paying benefits. Although the annual report of the Social Security Trustees has outlined a growing deficit in financial obligations for nearly four decades, the program is not in a position to go bankrupt or become insolvent. Being forced to claim early based on inaccurate information could cost retirees thousands of dollars in annual Social Security income.

Delaying Social Security

Second, we don’t have all the information we need to make a decision that we know is 100% correct. The only way to know if you’ve made the optimal decision to claim is to know the date you’ll be transferring. Honestly, that’s the information that makes me happy

Know, and I’d venture to guess that most people feel the same way. But without knowing the “termination” date, there’s no concrete plan to ensure you’ve made the optimal claim decision.

If you want to maximize what you get from Social Security during your lifetime, you’ll want to consider your health, marital status, and financial situation. Note that in summary these factors will be different for everyone.

While there are cases where filing early makes perfect sense, such as if you have a chronic illness or have been a lifelong low-earning spouse, the data is pretty clear that waiting will be the smart choice for most future retirees. recipients.

Eap Hosting Presentations On Understanding Social Security Benefits

Meet Motley Fool Investment Analyst Jason Moser Want the maximum Social Security benefit of $4,873? Make sure you do these two things. 69% of Gen-Xers expect to delay retirement. Here’s why it’s not so bad. 4 Secrets of Retired Millionaires Here are my top 3 reasons to claim Social Security at age 70

Invest better with The Motley Fool. Get stock recommendations, portfolio advice and more from The Motley Fool’s premium services. You’re eligible to receive Social Security at age 62, but that’s not always the best time to start taking it. You’ll be penalized for taking Social Security before your full retirement age (66 or 67), and you can get an even bigger benefit if you wait until age 70 to start taking it.

The earliest you can claim Social Security benefits is at age 61 years and nine months, and you can expect your first payment four months later—the month after your 62nd birthday. Social Security benefits are usually paid one month after they are due.

When To Apply For Social Security Retirement Benefits

For example, if you turn 62 on December 15, then your first full month of eligibility is January, and your payment for that month will come in February. If you’ve already reached age 62 and meet all other eligibility criteria, you can start receiving benefits in the same month you apply, if you choose, even if your first payment doesn’t come until the following month.

Learn About Social Security Income Limits

Taking Social Security at age 62 means you’ll receive a lower payment than waiting until full retirement age. The full retirement age is 66 for people born between 1943 and 1954 and phases up to age 67 for people born in 1960 or later.

If you were born in 1960 or later, you will be penalized 30% for taking Social Security before full retirement age, and all reductions are permanent. If you delay taking benefits after you reach full retirement age, you’ll get an 8% increase for every full year you do until you reach age 70, when the increases stop.

You can calculate your own full retirement age based on your birthday to help you consider how you can lock in your maximum Social Security benefits.

The amount by which your monthly Social Security benefit increases for each year you delay receiving benefits after reaching full retirement age (until you

How Much Social Security Will I Get?

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