Understanding Social Security becomes crucial for managing retirement finances as we approach our later years. If you're 55 or older, you may have questions about how your benefits will work. Below are five of the most common Social Security questions for seniors and straightforward answers.
1. When should I start claiming Social Security benefits?
This is one of the most important questions; the answer depends on your situation. You can begin receiving benefits as early as age 62. Still, the amount will be reduced if you claim before your full retirement age (FRA). Your FRA depends on your birth year and ranges from 66 to 67 years old. If you wait until age 70 to claim, your benefits will be higher because they will increase by 8% for each year you delay after FRA.
If you are still working at 62, your benefits could be further reduced due to the Social Security Earnings Test, which limits the amount you can earn before your benefits are momentarily reduced. (often called earnings restriction)
2. What happens if I continue working while receiving Social Security?
Working while receiving Social Security can affect your benefits, especially if you claim before reaching FRA. If you're under FRA, your benefits may be reduced if you earn more than the annual earnings limit (for 2025, this limit is $21,240). Once you reach FRA, however, there is no earnings limit, and your full benefits are restored.
Suppose your benefits are reduced due to work. In that case, the Social Security Administration (SSA) will recalculate your benefits when you reach FRA to ensure you're compensated for the months' benefits were withheld.
3. Will my Social Security benefits be taxed?
Social Security benefits can be taxed only if your income exceeds a certain threshold. The Social Security Administration will base your taxability on your combined income, which includes your adjusted gross income, nontaxable interest, and half of your Social Security benefits.
For single filers, if your combined income is between $25,000 and $34,000, up to 50% of your benefits may be taxed. If your combined income exceeds $34,000, up to 85% of your benefits may be taxed. These thresholds for married couples filing jointly are $32,000 and $44,000, respectively.
4. Should I agree with my spouse about when to take the Social Security benefit?
Discussing when to take Social Security benefits with your spouse is essential, as the decision can affect your financial future. You and your spouse should consider factors such as your current financial situation, life expectancy, and health, as these will influence the best time to start benefits. If one spouse plans to continue working or has a longer life expectancy, delaying benefits for higher payouts might make sense. Also, taking benefits earlier or later might impact survivor benefits in the future. Ultimately, aligning your decision with your long-term financial goals and needs can help ensure a more secure retirement for both of you.
5. What if I haven't worked long enough to qualify for Social Security?
You may still be eligible for Social Security through your spouse's or ex-spouse's record if you haven't worked enough to earn the required 40 credits (usually about 10 years of work). If you're a widow or widower, you may be able to claim benefits based on your late spouse's work history as early as age 60 (or 50 if you're disabled).
Understanding Social Security is vital for planning your retirement. Stay informed, and don't hesitate to contact the SSA for help. It's never too late to start planning!
This material is being provided for general information and educational purposes only and should not be construed as investment, tax, accounting, or legal advice, or used as the primary or final determinant of the best strategy on how and when to claim Social Security benefits. It is strongly recommended that each individual meet with a Social Security representative who can address his/her specific situation. A wealth of information, including interactive calculators, can be found at the Social Security Administration’s website: http://www.ssa.gov/retirement.
Advisory services are offered through Defined Wealth, Inc. or Lincoln Investment - Registered Investment Advisers. www.lincolninvestment.com Defined Wealth, Inc. and Lincoln Investment are independent and non-affiliated.
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