As estate planning and elder law attorneys, we help clients prepare for all stages of their senior years, because one thing leads to another. Looking ahead toward your active retirement period can be exciting, and if you take the right steps, you can enjoy your spare time to the fullest.
The “right steps” part is key, because it is not easy for most people to have the resources that they need to enjoy their golden years in comfort. For most, Social Security will be an important piece to the puzzle, but it is important to take maximum advantage of your benefit.
In this post, we will provide some helpful information about the Social Security program, with an emphasis on the best time to accept your benefit.
How Do You Gain Eligibility?
When you are working and paying FICA or self-employment taxes, you accumulate retirement credits. At the time of this writing in 2020, you receive one credit for every $1410 that you earn during the year. The maximum accrual is four credits per annum.
Once you have at least 40 credits, you will qualify for Social Security and Medicare. The amount that you receive will be based on the 35 years during which you earned the most amount of money.
You have some options with regard to when you start to receive your benefit, and the ideal choice will depend upon the circumstances. It is possible to accept a benefit when you are as young as 62, but the amount that you receive will be significantly reduced.
The exact amount of the reduction will be based on the year of your birth and just how early you decide to take the benefit. Suffice to say that it will be somewhere between 25 percent and 30 percent less than you would receive if you wait until the full eligibility age.
Full Retirement Age
For some unknown reason, there is no one standard age at which everyone qualifies for a full Social Security benefit unless you were born in 1960 or after. People that are in this category become eligible when they reach the age of 67 under the current laws.
The rules are somewhat convoluted for those that are older. People that were born between 1943 and 1954 become eligible at the age of 66. After that, the age of eligibility rises by two months each year, so someone born in 1955 would reach the full eligibility age 2 months after their 66th birthday.
This two-month per year arrangement goes on year-by-year until it tops out at 67 in 1960.
To give you some ballpark figures with regard to the full benefit amount, the average monthly benefit for this year is about $1503 a month for an individual, and the maximum is $3011. You can find out exactly how much you can expect to receive if you create an account on the Social Security Administration website.
Delayed Retirement Credits
The best way to maximize your Social Security benefit is to delay the submission of your application beyond your full eligibility age. If you do this, you increase your benefit by 8 percent for every year that you delay. This accrual ends when you are 70, so there is no incentive to delay after you reach that age threshold.
Let’s Have a Have a Conversation!
It can be difficult to understand when you should start to accept your benefit because there are many different factors that come into play, especially if you are married. We would be more than glad to gain an understanding of your situation and help you make a fully informed decision.
Of course, if you would like to have a broader discussion, we can extend the conversation into any elder law or estate planning area. You can set up a consultation if you call us at 219-865-2285.