If you’re approaching retirement age or planning to file for Social Security in 2019, there are some changes to the program that you need to know. Understanding how you can qualify, when you should file, and what benefits to expect can help make you make a more informed claiming decision, and better prepare you in having a comfortable retirement.
Am I eligible for Social Security benefits?
Paying Social Security taxes doesn’t automatically qualify you to claim benefits once you retire. To be eligible for Social Security, you need to accumulate 40 credits over your lifetime. You earn credits by working and paying Social Security taxes, and you can gain up to four credits each year.
In 2019, an income of $1,360 in is equal to one work credit if you pay Social Security taxes on it. A yearly wage of at least $5,440 will allow you to get the maximum four credits. Just keep in mind that the amount of income necessary to earn a credit can change each year according to inflation.
If you’re at least 62, and you have 40-lifetime credits, you are eligible for Social Security benefits. But at 62, you haven’t reached the “full retirement age” yet. And that means you won’t collect 100% of your total monthly benefit if you file early.
When can I claim Social Security benefits?
To collect the full amount of your Social Security benefit, you have to wait until a certain age to apply. This is known as your full retirement age, and it changes according to the year you were born. You can take your benefits as early as age 62, but there’s a reduction of about 30% if you do it before hitting that magic number.
The full retirement age for retirees turning 62 this year is 66 years and six months. This is up from 66 years and four months for those who turned 62 last year in 2018.
Here’s a quick rundown of Social Security’s full retirement age by year of birth:
- Born 1960 or later – Your full retirement age is 67 years
- Born 1959 – Your full retirement age is 66 years, ten months
- Born 1958 – Your full retirement age is 66 years, eight months
- Born 1957 – Your full retirement age is 66 years six months
- Born 1956 – Your full retirement age 66 years, four months
Since you’ll get less if you start collecting before you reach the right age, it might pay to hold off on filing. Talking with a financial professional can help you to know when is the right time to apply.
How much will I get from Social Security?
There were 63 million Americans who received Social Security in 2018, and the monthly benefit varies considerably. After the 2.8% cost-of-living adjustment for 2019, the average retiree will receive $1,461. Your amount might be significantly less than the average, or it could be much more. It mostly depends on how much you earn throughout your working life and when you start claiming it.
You can’t rely wholly on Social Security to fund your retirement since there’s a cap on the amount you can receive. If you’ve reached full retirement age and are filing to claim Social Security for the first time in 2019, the maximum amount you could get is $2,861. For better retirement planning, you should also consider an employer-sponsored 401k, contributing to an IRA, and a personal savings account. Working with a fee-based financial advisor can help you live the retirement lifestyle you desire by making smarter financial and investment choices and learning how to get the most out of the financial resources you have.
Can I collect Social Security retirement benefits if I’m still working?
Any time after you reach age 62, you’re eligible to start claiming Social Security. That means you can collect if you’re still working part time or full time. Your benefit amount will likely be less if you’re working and haven’t reached full retirement age. But if you continue to work, it could mean a higher amount for you in the future.
If you keep working while collecting, Social Security will deduct a little from your benefit payment each month if you earn over a certain threshold. The amount is different depending on whether or not you’re at full retirement age when you file, and it can change each year with inflation.
For those who continue to work and are under full retirement age for the entire year, Social Security will deduct $1 from your benefit amount for every $2 you earn above the limit. The annual limit is $17,640 for 2019.
If you reach full retirement age this year and continue working, your benefits are reduced $1 for every $3 you earn above the annual limit. In 2019, the cap is $46,920, but it can change each year.
Identifying what the monthly payment might be is a little more complicated if you continue working. But your financial advisor can help put you in the best financial position for your situation.
Final considerations for claiming Social Security
A critical factor in deciding whether or not to claim Social Security is how much income you can expect. It depends mostly on when you file and if you’ve reached full retirement age or not. To get the complete picture, compare your benefit at age 62 to what it would be if you held off on filing for a few years.
If you’re thinking about working a little in retirement, you could face higher taxes. How much depends on whether or not you’re at your full retirement age. But you’ll want to run the numbers to see how that could impact your monthly benefit amount.
Social Security will likely play a significant role during your retirement. To ensure you are maximizing your Social Security retirement income an and not making common claiming mistakes that can cost you thousands in lost benefits, consider a Social Security Claiming Strategies Review before filing for your benefits.