Everyone has heard about Social Security. Every pay day, you see it come out of your check. You hear about it in the news, and sometimes wonder if it will still be there when it is time for you to retire. But what do you really KNOW about Social Security? Today we want to talk about the Top 5 Things You Should Know to Utilize Your Social Security Benefits. By having a good understanding of these 5 things, you can be better prepared when it is time to qualify for your Social Security and make informed decisions to take advantage of your benefits!
Your benefit is based on the 35 years in which you earned the most money. If you have fewer than 35 years of earnings, each year with no earnings will be factored in at zero. You can increase your benefit by replacing those zero years, say, by working longer, even if it's just part-time. But don't worry -- no low-earning year will replace a higher-earning year. The benefit isn't based on 35 consecutive years of work, but the highest-earning 35 years. So if you decide to phase into retirement by going part-time, you won't affect your benefit at all if you have 35 years of higher earnings. However, if you make more money, your benefit will be adjusted upward, even if you are still working while taking your benefit.
Marriage brings couples an advantage when it comes to Social Security. Namely, one spouse can take what's called a “spousal benefit”, worth up to 50% of the other spouse's benefit. Put simply, if your benefit is worth $2,000 but your spouse's is only worth $500, your spouse can switch to a “spousal benefit” worth $1,000 -- bringing in $500 more in income per month. This is contingent upon the higher earning spouse’s retirement age, but if managed correctly, it can be a great benefit for the lower earning spouse!
Like a regular spousal benefit, you can get up to 50% of an ex-spouse's benefit. And the beauty of it is that your ex never needs to know because you apply for the benefit directly through the Social Security Administration. Taking a benefit on your ex's record has no effect on his or her benefit or the benefit of your ex's new spouse. Unlike a regular spousal benefit, if your ex qualifies for benefits but has yet to apply, you can still take a benefit on the ex's record if you have been divorced for at least two years. It is also important to note: Ex-spouses can take a survivor benefit if their ex has died first, and like any survivor benefit, it will be worth 100% of what the ex-spouse received. If you remarry after age 60, you will still be eligible for the survivor benefit.
Once you hit full retirement age, you can choose to wait to take your benefit. There's a big bonus to delaying your claim -- your benefit will grow by 8% a year up until age 70! Any cost-of-living adjustments will be included, too, so you don't forgo those by waiting. Here is a benefit to delaying your claim:
- While a spousal benefit doesn't include delayed retirement credits, the survivor benefit does. By waiting to take his benefit, a high-earning husband, for example, can ensure that his low-earning wife will receive a much higher benefit in the event he dies before her. That extra 32% of income could make a big difference for a widow who has lost her husband's stream of Social Security income.
There are 567 ways to collect your Social Security benefits! That’s a lot of different choices and options to get bogged down with! The fact of the matter is; these choices can be incredibly important to your retirement income. According to the Social Security Administration, some 52 percent of married couples and 74 percent of unmarried persons get half or more of their retirement income from Social Security. They also say about 22 percent of married couples and 47 percent of unmarried people rely on Social Security for 90 percent or more of their income. When the stakes are that high, you want to make the absolute best choices possible.
The financial advisors at Sound Financial Strategies Group have been working with clients to help navigate retirement and Social Security benefit decisions for over 30 years. We help our clients see the full retirement picture and assist them in making informed decisions for them. We would welcome the opportunity to visit with you and help you navigate your retirement. Give us a call today!
Investment Advisory Services offered through Sound Financial Strategies Group, Inc. (“SFSG”), a Registered Investment Adviser. Certain representatives of SFSG are also Registered Representatives offering securities through APW Capital, Inc., Member FINRA/SIPC, 100 Enterprise Drive, Suite 504, Rockaway, NJ 07866 (800)637-3211. SFSG and APW Capital are separate and unrelated companies.
Posted on Tue, October 27, 2015
by Sound Financial Strategies Group