Knowledge is power. Many people do not understand all the ins and outs of Social Security so when it comes to making decisions about how and when to collect, they choose in the dark. PennyPinchingHints wants you to know enough about Social Security so you can make better choices.
Know the Basics
- Social Security (SS) is a government payment due to people who have contributed to SS in their paychecks for at least ten years. There are also death benefits. If you die, your spouse, surviving ex-spouse, dependent parents, and disabled or underage children can collect your remaining benefits.
- You are eligible for full SS benefits at age 66. You are eligible for reduced SS benefits at age 62.
To apply for Social Security you will need
- Your original Social Security Card or a record of your SS number and your birth certificate.
- If you served in the military before 1968, you will need discharge papers.
- You may also be asked for proof of US citizenship.
- You will need the last 5 years of your W-2 forms, or if you are self-employed you will need a copy of your last year’s tax return.
The average monthly payment is around $1200. But, you should understand how the amount of Social Security you receive is calculated. A percentage is taken of the average of your annual salary over the highest paid 35 years you worked. If you had a low salary over the course of those years, a higher percentage rate is used than for those who were highly paid over those years. If you worked less than 35 years, the percentage will be applied to the average of your annual salary over the years you worked. You are eligible for a Cost of Living increase each year you collect.
Know the Details
- You may be eligible for Social Security Disability Insurance (SSDI) if you cannot work due to injury or illness even before the age of 62. You must first qualify by having enough work credits, meet the medical criteria, and be employed at the time of your disability. You will receive $1,000 per month. When you reach full retirement age, you will continue to receive the same amount.
- When you die, survivor benefits will go to underage children until they graduate from high school or come of age. If you have dependent children or parents, they also may receive a survivor benefit—up to $750 per month.
- Spousal survivor benefits are available to both your widow and to your ex-spouse(s). They are also available to your common law wife if the state in which you live recognizes common law marriage. For widows who are receiving their own SS benefit, they will continue to receive the higher of the benefits, but not both. For exes to receive a survivor benefit, they must have been married to you for 18 years before your divorce. They may receive the benefit before the age of 60 if they are no longer married or after the age of 60 if they are married. If they are disabled, they may receive the benefit after the age of 50 even if married. In either case, when they reach the age of 62 they may choose to switch to their present spouse’s benefit if it is larger or keep the ex-spouse’s benefit. There is a caveat here: If an ex-spouse has been married to you for 18 years, they can be granted SS spousal benefits through the divorce decree. If they waive that right in the divorce decree, they are no longer eligible for benefit. But, if you remarry and do not change the benefactor on your SS papers, the named person will get the benefits even if you had another benefactor named in your will. Change those benefactor papers!
- Most people who collect a public pension, that is, a state pension as a teacher, policemen, or state worker, or those who have a federal or military pension, can collect both pensions. But, here’s another caveat: There are fifteen states in which some do not pay toward SS and therefore cannot collect SS or even survivor benefits. Check your state! Also check into taking on a second career, for example as a teacher. If you do so in one of these fifteen states, you could be jeopardizing your SS.
- SS benefits are not counted as income in bankruptcy.
- You cannot cash a SS check after 12 months after the date of issue.
Things to Consider
- You already know you can retire at age 62 but at reduced benefits. If you wait until you’re 66, you can receive full benefit or 35% more than if you take early retirement. But consider this, if you retire at age 70, you will receive 75% more. Even if you continue to work at a lesser salary, remember your SS benefit is calculated on your best 35 years of pay. It might be worth waiting.
- Consider, too, supplementing your SS payment with work. You can even use unemployment to supplement you SS. There are limits, however, to what you can earn in addition to SS before your SS is reduced. If you are between the ages of 62 and 66, you can earn up to $14,160 more. If you go over that limit, your SS is reduced by $1 for every $2 you go over. If you are 66 or older, you can earn up to $37, 680. If you earn more, your SS will be reduced by $1 for every $3 you earn over this limit. It is important for you to understand you can continue to work while receiving you SS benefits.
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