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For many retirees, social security pensions are the only source of fixed income when they stop working. As retirement approaches, people are thinking about when to apply for these benefits. Full retirement benefits are available from age 65 to 67 at full retirement age, depending on when the applicant was born. According to the social security administration (SSA), a person can apply as early as age 62 and receive about 25% less than the full retirement benefit, or they can defer benefits until age 70 and receive a higher amount than the full retirement benefit.
As you approach the age when you want to receive your benefits, you find that many of these strategies have been curtailed or are changing. Read on to learn what factors help grow your money – and what strategies changed with the 2015 budget bill.
What is available?
Social security retirement benefits are available to retired workers, their spouses as spousal benefits, and spouses and children as survivor benefits. These benefits are based on a retiree's social security contributions and age at the time the benefit amount is determined.
If you want to claim your social security benefits, there are some little-known strategies that can help you decide when you or your spouse should apply. There are pros and cons for each opportunity and what work for you may not work for your neighbor. However, one of these options may improve social security retirement for you and your family. (for social security basics, read introduction to social security and ten frequently asked questions about social security. )
1. The two-claims approach: if you are old enough
One strategy that can benefit two working spouses is for one spouse to claim spousal benefits at full retirement age while continuing to work and accumulating higher retirement savings for his or her own account. Often, one spouse may decide to retire at full retirement age while the other spouse continues to work after full retirement age. In this case, it may make sense for the retired spouse to claim the full retirement pension while the working spouse applies for a "restricted application" for marital benefits but continues to work. The advantage of this plan is that the working spouse receives marital credits equal to one-half of the retired spouse's full retirement benefit (assuming the working spouse is of age), while the spouse's future entitlement is limited to 70. Year of life continues to increase. Am 2. November 2015, president obama signed a budget bill that included a provision that will end this strategy for anyone 62 years of age or younger.31, 2015. Younger americans may not file for spousal benefits and then wait until full retirement age to file for their own benefits. Here's why this could be a financial loss.
For recipients born between 1943 and 1954, the benefit increases 66% (full retirement age) by 8% per year. In four years, at the age of 70, the benefit is about 132% of the full retirement pension. For this strategy to work, each spouse must have reached their full retirement age before they can claim benefits. When the working spouse reaches age 70. If the beneficiary reaches the age of majority, he/she can claim higher benefits instead of honorary benefits.
Does this strategy make financial sense? It may be if you plan to live at least to your full life expectancy. Based on the hypothetical numbers from the example, both spouses would need to live about 81 years for the total cumulative benefits received with the spousal option to exceed the cumulative benefits of both benefit entitlements at full retirement age.
2. Early entitlement delayed
The new budget bill also addresses another strategy that could be used if one spouse wants to retire early and receive permanently reduced benefits while the other spouse continues to work. What if the retired spouse is older than the working spouse? Here, the working spouse loses the opportunity to take advantage of the age difference and receive delayed retirement credits toward his or her own retirement benefit.
mattcastruccimazda.com – claim early-claim late strategy
Now, in this example, because of the 2015 budget bill and something called a "classified filing," the woman can no longer file the restricted filing.If she arrives at full retirement age, she is considered to have settled her full retirement benefit (since it is larger than the spouse's benefit) and is no longer eligible for a higher benefit at age 70. She must wait until 70 and in the meantime do not receive marital benefits. If clara expects to live well beyond the average retirement, the increased benefits she may receive after 70. Receives their retirement income substantially when they reach the age of 65, but the couple lost the additional interim benefit.
3. Suspend entitlement to spousal benefit: a benefit that will end
Similar to the late entitlement with eligibility, a spouse could work past full retirement age and let his or her retirement annuity grow with delayed retirement credits. Under current law, there is still a way for a non-working spouse with little or no retirement benefits to claim honorary benefits without waiting until the working spouse retires late. This approach is called file and suspend. The budget proposal of 2. November 2015 included a provision that made this option effective 1. May 2016 ended.
Here's how it works in less than six months of use: eligible for maximum honorary benefits ( 50% of spousal benefit) both spouses must be of legal age, and the spouse must also be eligible for benefits. After both spouses have filed their respective benefit claims, the working spouse may suspend his or her claim (this is called "file and suspend"). This allows the non-working spouse to receive full marital benefits, while the working spouse cancels out their own benefits and increases their future value.
Again, if a retiree sets aside full pension benefits for extended benefits based on deferred retirement credits, they must live long enough to make up the difference. For more information, visit
How to get free social security spousal benefits (for now) . 4. The "do-over" payout option: available for one year, not many
There is a fourth strategy that people who don't know is largely outdated are still telling you about. In december 2010, social security established a strict twelve-month time limit for a strategy variously referred to as "withdraw and reapply" and "adopt and repay". Under certain circumstances, retirees could receive early retirement benefits at age 62, repay the amount received later, and then reapply for a larger monthly benefit. This strategy was to get an interest-free loan from the government. Under the SSA, a beneficiary could withdraw his or her claim, repay all benefits received (without interest), and then apply for benefits based on his or her current age.
The 12-month limit pretty much eliminates the financial benefits of this strategy – although it still gives social security recipients a short time to reconsider their decision to use benefits and decide to wait until they receive more. This could be especially helpful for those who file before full retirement age and then find they can go a few more years without the payments, giving them a larger benefit.But it's no longer the big spender it was in the past.
Here's what's involved: if a recipient takes care of social security within 12 months, they'll have to pay back a significant amount of money. The beneficiary has had the option of making benefit payments and retaining or using the earnings – but this is not the kind of benefit someone had if they used these funds for years, and a large increase in monthly benefits upon reapplication. .. You know that once an individual has received a refund, he or she can claim either a tax refund or a credit for taxes paid on the benefits received. (to learn more about tax returns and credits, read
Saver's tax credit: an added bonus to fund your plan and our special tax on income tax.) another element to consider: during the period when the person is without social security, he or she must pay for medicare part B out of pocket because social security does not make payments until he or she resumes receiving benefits. Finally, it can take a while for the SSA to start making payments after someone reapplies for them, so they may have to go a few months without a benefits check. (for more on medicare, see