2019 Guide to Maximizing Your Social Security Benefits
Knowledge is Power: Social Security Strategies to Maximize Your Retirement Benefits
Last year, more than 63 million Americans received Social Security benefits, according to the Social Security Administration, with an average monthly benefit of $1,422. These benefits are often a critical component of retirees’ income. But according to a study by the Nationwide Retirement Institute, 91% of older adults don’t know what factors, if any, affect the amount of their Social Security benefits. Understanding all your benefit options—as well as the best way to claim them—can help you more accurately plan for your financial future. In this guide, you’ll find a summary of key considerations to keep in mind as you calculate what you’ll need to comfortably retire.
In This Guide: —How Benefits are Calculated —Informed Claiming Strategies —When to Begin Collecting —Working While Collecting Benefits —Spousal Benefits —Divorced Spouse Benefits —Survivors Benefits
How Benefits are Calculated To be eligible for Social Security benefits, you must earn 40 credits based on your work history, including time in the workforce and/or the amount of wages that are earned within a certain period. In 2019, workers receive one credit for every $1,360 earned, up to a maximum of four credits each year. Based on the Consumer Price Index, Social Security payments were increased by 2.8% beginning in January 2019. The average monthly payment for retired individuals is now $1,461 , up from $1,422 in 2018. Retired couples receive an average of $2,448 per month, up from $2,381 in 2018. The Social Security Administration offers an online benefit estimator at ssa.gov/estimator based on your actual Social Security earnings record. It’s important to note that these are estimates, as Social Security can’t provide exact figures until you actually apply for your benefits.
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Informed Claiming Strategies The Bipartisan Budget Act of 2015 introduced substantial changes to Social Security law; specifically, the use of two claiming strategies used by many recipients to maximize their benefits and create additional retirement income. “File and suspend” —One spouse, generally the higher earner, files for their retirement benefit but immediately suspends payment. This allows the worker’s spouse to begin collecting a spousal benefit while the worker continues to earn Delayed Retirement Credits on his or her own record. Under the current law, if you were born on or before May 1, 1950 , you would have had to file and suspend by April 29, 2016 to allow others to collect benefits based on your earnings. If you suspended your benefits after April 29, 2016, your spouse’s benefits will also be suspended concurrently. “Restricted application” — Allows a spouse who attained full retirement age to collect only a spousal benefit and defer collection of his or her own benefit. At a later date, usually age 70, the spouse would then switch to his or her own retirement benefit, which would have grown to its maximum through Delayed Retirement Credits. Now, restricted application is limited to those born January 1, 1954 or earlier . Anyone born after that date is subject to the “deemed to be filing” rule, even at their full retirement age, and will be unable to file for only spousal benefits or ex-spousal benefits while their own retirement benefits accrue Delayed Retirement Credits. Under the recent legislation, the “deemed to be filing” rule was extended from age 66 to age 70 as well. Deeming is the requirement that if you take your retirement benefit and are eligible for a spousal benefit or a divorced spouse’s benefit, you must also take their spousal benefit and vice versa. This leaves you with roughly the larger of the two benefits.
“ According to a study by the Nationwide Retirement Institute, 91% of older adults don’t know what factors, if any, affect the amount of their Social Security benefits. ”
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When to Begin Collecting When Social Security was first created, 65 was considered full retirement age. Due to the increase in average life span, revisions have been made to extend Social Security’s funding ability. The chart below shows the current minimum age for collecting full benefits based on the year you were born.
Year of Birth 1937 or Before
Minimum Retirement Age for Full Be nefits
1938 1939 1940 1941 1942 1955 1956 1957 1958 1959
65 + 2 months 65 + 4 months 65 + 6 months 65 + 8 months 65 + 10 months 66 + 2 months 66 + 4 months 66 + 6 months 66 + 8 months 66 + 10 months 66
1943 to 1954
1960 or After
67 Source: Social Security Administration
Even though Social Security benefits can be claimed as early as age 62, claiming them before you reach full retirement age will result in reduced monthly benefits. The amount of benefit reduction will depend upon the actual type of Social Security benefit you are receiving. For example: Your individual retirement benefit is reduced by 5/9 of one percent (or 0.0056) for each month that you receive benefits prior to reaching your full retirement age (up to three years) and 5% for each year beyond that . If you wait to claim your benefits until full retirement age or up until the maximum threshold of 70, your benefits will be greater than if you begin receiving payments early. For example: If you opt to delay taking your Social Security retirement benefits, your benefits will be increased by a certain percentage each year (depending on your date of birth). The percentage of increase is calculated using simple interest (not compounded). This increase stops once you reach 70, even if you have not yet taken receipt of your benefits. For anyone born in 1943 or later, the yearly percentage increase for delaying benefits is 8% . Continued
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Working While Collecting Benefits Many Americans continue to work while collecting their Social Security benefits. If you’re among them—or plan to be—it’s important to understand how earning an income may affect the amount of your benefits. Social Security limits the amount you may earn without penalty depending on your age. For 2019, the parameters are as follows: ■ If you’re under full retirement age during all of 2019, Social Security will deduct $1 in benefits from every $2 that you earn above $17,640/yr ($1,470/mo) . ■ If you reach full retirement age during 2019, Social Security will deduct $1 in benefits for every $3 you earn above $46,920/yr ($3,910/mo) , until the month you reach full retirement age. ■ If you’ve already reached full retirement age, you keep all your Social Security benefits , no matter how much you earn. There may be an unexpected advantage to working while collecting. Social Security calculates your retirement benefit using your highest 35 years of earnings, regardless of when those years occur. That means if your new earnings are higher than any of the years used to originally calculate your benefits, the result is a benefit increase going forward. Spousal Benefits Many people aren’t aware that they may be eligible to receive Social Security benefits based on their spouse’s earnings record—even if they themselves have never worked. If you’re 62 or older and your spouse is eligible for or currently collecting Social Security benefits, you may be able to apply. Due to the changes made to the “Restricted Application” claiming strategy mentioned on page 3, if you were born on January 2, 1954 or later, your spouse must be receiving their Social Security benefits in order for you to receive spousal benefits based on their work record . Spouses are entitled to benefits based on their partner’s earnings record, provided that the spouse is legally married to the worker at time of application and for at least one continuous year immediately prior to the date of the application. As of June 26, 2015, this now includes same-sex couples. For common law marriages, Social Security follows the state laws. In most cases, at your full retirement age you’ll receive 50% of your spouse’s full retirement age benefit amount . This amount doesn’t increase if you defer collection past full retirement age. However, if you begin receiving your spousal benefits prior to your own full retirement age, your spousal benefit will be permanently reduced.
You may work and collect Social Security spousal benefits at the same time. If you’re under full retirement age during all of 2019, you may earn up to $17,640 in gross wages each year without reduction to your benefits.
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Divorced Spouse Benefits If you’re currently divorced or going through a “gray” divorce, it’s likely that your financial situation will change— including possibly your Social Security benefits. Divorced spouses can collect benefits based on their ex-spouse’s record if the following qualifications are met: ■ The marriage lasted 10 years or longer ■ You’re not currently married (to your former spouse or any other individual) ■ You’re 62 or older ■ Your ex-spouse is entitled to benefits (even if he or she hasn’t yet applied), as long as your divorce has been finalized for at least two full years ■ The Social Security benefit based on your own earnings record is less than you’d receive based on your ex-spouse’s earnings record If you’ve remarried, you won’t be eligible to collect Social Security benefits based on your former spouse’s work record while your current marriage remains in effect. As a divorced spouse, your benefit will be equal to one-half of your ex-spouse’s full retirement amount if you begin receiving benefits at your own full retirement age . If your birthday is January 2, 1954 or later , the option to take only one benefit at full retirement age no longer exists. If you file for one benefit, you will be “deemed” to be filing for all retirement benefits, including ex-spousal benefits. This means that if you are eligible for Social Security retirement benefits based on your own earning record, you will receive that amount if such an amount is higher than your benefit would be as an ex-spouse. If, however, the benefit on your ex-spouse’s earnings record is higher, then you will receive a benefit amount that is a combination of benefits that equals that higher amount.
“ At a minimum, your marriage must have lasted for at least 10 years to be eligible to collect benefits based on your ex-spouse’s earning record. ”
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Survivors Benefits If your spouse is deceased, you may be able to collect Social Security benefits based on their earnings record. Although the eligibility requirements are the same, it’s important to note that Social Security survivors benefits aren’t the same as Social Security spousal benefits . The number of credits that are needed to provide benefits for survivors will depend on the worker’s age when he or she dies. Although you and your spouse must be married for at least a year to qualify for spousal benefits, you only need to be married for at least nine months before the worker’s death for survivors benefits . Widows and widowers can start to collect survivors benefits as early as 60 (50 if you’re disabled), but you’ll receive a smaller amount each month. If you delay collecting survivors benefits until your full retirement age, you’ll receive 100% of the amount. Note that you cannot collect both survivors benefits and your own retirement benefits simultaneously—you must choose one or the other . Making the Most of your Benefit Opportunities There’s no doubt—calculating and claiming your Social Security benefits can be complicated. The Social Security Administration offers an online benefit calculator at ssa.gov/estimator . This calculator provides estimates based on your actual Social Security earnings record, so it can be a valuable planning tool.
By staying up to date on the latest legislation and fully understanding your options, you can make sure you’re not leaving money on the table when it comes to funding a comfortable retirement.
“ Widows and widowers can start to collect survivors benefits as early as 60 (50 if you’re disabled), but you’ll receive a smaller amount each month. ”
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Will You Have Enough to Retire? Reverse mortgages are gaining popularity as a financial planning tool to help fund a comfortable retirement and as a means to help defer collecting Social Security benefits until maximum monthly benefits can be claimed. Are you at risk of outliving your retirement income or savings? To speak with a knowledgeable reverse mortgage specialist, call today:
Reverse Mortgage Funding, LLC 800.214.1265 reversefunding.com
By: Cassandra Quinn Edited by: Kurt Czarnowski, Former Communications Director for the Social Security Administration January 2019 Consumers should not rely on this material for retirement-planning or other advice and should consult with the appropriate financial professional. This material contains paid or sponsored content or speakers. Source information provided by the Social Security Administration.
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