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A Detailed Guide for Filing for Social Security Benefits

The US Department of Labor estimates that more than 20% of Americans never save any part of their annual income. The no-savings lifestyle will impact your financial stability, especially when you are approaching retirement.

Social Security plays a vital role in providing a financial foundation for workers when planning for retirement. It also includes income protection for workers who become disabled and to families whose breadwinners pass on.

How Social Security Works

Social Security (SS) is a government program established in 1935 that collects taxes from working Americans and distributes the funds to eligible retirees, disabled workers, or their families. A worker needs up to 40 credits to qualify for Social Security, earning up to a maximum of four credits per year.

Social Security Benefits provide approximately half of the senior citizens 50% of their monthly income and one in every five up to 90% of their income. When conducting retirement planning, it is worth it to keep in mind some key facts about social security. Check out three questions you need to ask before filing for Social Security Benefits.

1. What Is My Full Retirement Age?

Full Retirement Age (FRA) is the age at which the Social Security Administration deems you eligible for 100% of the Primary Insurance Amount (PIA.) The PIA is an average income of the 35 highest-earning years. For Americans born between 1943 and 1954, the full retirement age is 66 years old. For persons born between 19554 and 1960, the FRA increases by two months each year to reach 66 and 10 months. If you were born in 1960 or later, your FRA is 67 years.

2. When Can I Collect SS?

You are eligible to file for Social Security Benefits when you reach 62. However, choosing to receive your benefits early comes with a tradeoff. You will permanently reduce your monthly benefits. For example, if you apply at 62, you may lose up to 25% of your monthly benefit compared to if you waited till your FRA. Delaying your collections past your FRA may increase your payouts by 8% annually, up to the age of 70. For individuals with an FRA of 67, you may receive up to 124%, while those whose FRA is 66 can receive up to 132%.

3. How Does Spousal Benefit Work?

Couples are eligible to claim for spousal benefits based on their spouse’s work record. The Bipartisan Budget Act of 2015 tightened some of the regulations on spousal benefits. However, couples can work together to maximize how much they receive based on their incomes.

The lower-earning spouse may file for their benefits first as the higher-earning spouse holds their benefits. The Social Security benefits can increase 8% annually, leading to a bigger payout later on to benefit both. For divorced couples who were in a marriage for over ten years, the eligible ex-spouse may receive up to 50% of the benefits. If the spouse starts to receive their benefits before their FRA, the amount will reduce permanently by a percentage.

The Social Security program forms an integral part of most Americans’ retirement plans. Understanding how the program works will enable you to make an informed decision on your Social Security Benefits. For more information on social security benefits, feel free to contact us today.


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