Don't get tripped up by the various rules governing the program.
Dan
Caplinger Oct 13, 2019 at 7:05AM
It's hard to know everything there is to know
about Social Security. Even experts on the program
disagree about some of its fundamental aspects, and you'll find advice that
spans the entire spectrum on certain key issues.
For instance, it might seem pretty
straightforward to consider when you qualify to receive retirement benefits
under Social Security. But even though there is a simple guideline that
establishes when most people are eligible to claim benefits under their own
work history, there are also plenty of other nuances to consider to have a
complete answer to the question of when retirement benefits are available.
The simple answer to
when you can claim retirement benefits
Nearly all people can claim Social Security
retirement benefits once they turn 62. The primary exception is for those who
don't meet the baseline eligibility requirements for Social Security.
Specifically, the Social Security program
requires you to work long enough and make enough money to earn at least 40 Social Security credits over the
course of your career. That usually takes people 10 years of qualifying work,
which includes any wage or salary income on which you paid Social Security
payroll taxes. Self-employment income also counts for the purposes of earning
credits. With each credit taking just $1,360 in annual earnings for 2019, it
doesn't take a high-paying job to earn the $5,440 necessary to collect the
maximum of four credits per calendar year.
How different claiming
decisions affect your benefits
Although you can claim
retirement benefits at 62, you don't have to. In general, you can claim pretty
much whenever you want after your 62nd birthday. However, there are a couple of
key dates that are especially important for those expecting to claim Social
Security to know.
First, full retirement age is the age at which
the Social Security Administration calculates your regular retirement benefit
amount. Claim retirement benefits before full retirement age, and you'll have
to accept smaller monthly checks in exchange -- anywhere from 5% to 6 2/3% per
year less. Claim after full retirement age, and you'll typically qualify to
receive higher monthly benefit payments that are 8% larger for every extra year
you wait.
What your full retirement age is depends on the
year in which you were born. Those born in 1937 or before had a full retirement
age of 65. That gradually rose two months per year for birth dates between 1938
and 1942 before stabilizing at 66 for those born between 1943 and 1954.
Subsequently, full retirement age has been rising for those born from 1955 to
1959, and those born in 1960 or later have a full retirement age of 67.
Age 70 is the other key age for claiming retirement
benefits. The delayed retirement credits you earn from waiting after full
retirement age to claim stop accruing once you turn 70. At that point, it no
longer makes sense to wait longer before claiming your Social Security.
The wild card of work
Finally, keep in mind that even though you can
technically claim your retirement benefits when you're 62, it doesn't mean
you'll actually get paid anything. Social Security has rules for how much
recipients who are still working are allowed to earn from a job before having
to forfeit the benefits they've received.
For 2019, someone who's younger than retirement
age throughout the year can earn only a maximum of $1,470 per month -- $17,640
per year -- before starting to lose their benefits. For every $2 you earn above
that annual threshold, you'll lose $1 in annual benefit payments.
It's possible to lose your entire Social Security check this
way. For instance, if you have a $60,000 job and qualify for $1,000 in early
retirement benefits, you'd get absolutely nothing from Social Security. $60,000
minus the $17,640 threshold equals $42,360, so you'd lose up to $21,680 in
annual payments from Social Security. $1,000 per month in benefits is just
$12,000, so the reduction would be more than adequate to leave you with
nothing.
Fortunately, in this case, for every month of
benefits you have to forfeit, you're treated as if you'd claimed your benefits
a month later than you did. However, it can be a shock to have checks taken
away, so it's best to know this is coming before it actually does.
Think about your
retirement
It's easy just to figure you'll claim retirement
benefits at the earliest possible age of 62. However, there's a lot more to the
question than that, and knowing all the nuances can help you make a better
decision when it's time to claim your Social Security.
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