The longer you live, it makes sense to delay Social Security until your FRA or age 70. If you qualify for Social Security, you can take it as early as age 62 or delay it as late as age 70. However, there are pros and cons for each option, and the optimal choice will be unique to you.
If you decide that waiting is the right decision, needing the money could prevent you from following that choice, but there are some actions you can take in advance that can help prevent this.
Here is some information from a recent Fox Business article you may find useful:
Long-term care, whether provided in a private home, a nursing home, an assisted living facility or a continuing care retirement community, is expensive. According to the 2020 Genworth Cost of Care Survey, the median national rate for a private room in a nursing home is over $100,000 a year.
Many family caregivers and seniors assume these costs will be taken care of by Medicaid, the jointly funded federal and state program that provides health insurance for people with low income and limited assets. When it comes to long-term care, this public assistance program does pay for the largest share of these services, but only if a senior meets strict financial and functional requirements. Medicaid is administered by each state, so keep in mind that criteria can vary considerably from one state to another.
Social Security Benefits
If you receive Social Security or SSI, you likely have already noticed that your check is slightly larger this year. The Social Security Administration provided a 1.3% cost-of-living adjustment (COLA) for benefit payments, which brings the federal SSI payment to $794. In addition, the amount that workers can earn before losing their eligibility for disability based on their work has increased to $1,310 for non-blind individuals.
Social Security recipients will get a 1.6 percent cost-of-living adjustment (COLA) in their monthly benefits starting in January. The average individual retired Social Security beneficiary is expected to see a monthly benefit jump from $1,479 to $1,503, an increase of roughly $24 per month or $288 for the year.
According to an article in Forbes magazine in September, there are several changes to Social Security coming in 2020.
Here are six ways that Social Security will be changing in 2020:
Dipping into the Social Security Trust Fund
Without some major action from Congress, the current excess trust fund revenue will be depleted by the year 2034. If this occurs, it is estimated that Social Security would only be able to pay less than 80% of the promised benefits from ongoing payroll taxes.
If the government throws out lowering the payroll tax to spur the economy, the Social Security trust fund would likely be depleted faster.
Full Retirement Age Has Increased
For those still a few years away from retirement, those born in 1960 or later, the full retirement age has increased to 67. You will still be able to start taking Social Security Retirement Benefits at age 62, but with reduced monthly payments.
Cost of Living Adjustment
Low inflation is a good thing for consumers, as it means pricing isn’t going up that quickly. On the other hand, lower inflation numbers mean small cost of living increases for your Social Security benefits. In case you didn’t know, your Social Security benefits may be increased each year, partially depending on inflation numbers.
For 2020, the Social Security cost of living adjustment will be 1.6%. Not life-changing, but if you are living off Social Security alone, every penny counts. For the average retiree, this would likely amount to around $25 more per month. For the highest earners, this could come closer to $50 more per month in Social Security retirement benefits.
Maximum Social Security Benefits Will Increase
For workers near the top of the Social Security income scale, $132,900 or more for 2019, your maximum Social Security payout will likely increase slightly in 2020. No individual at full retirement age can take home more than $2,861 per month, regardless of their pre-retirement income. This number can be increased by delaying Social Security until the age of 70.
In case you were wondering, waiting till 70 could increase your Social Security benefit by 32% compared with the starting benefit at 66. This takes the maximum monthly benefit up to about $3,776 per month.
More of Your Social Security Will be Taxed
Yes, your Social Security benefits are taxable. The amount that is hit with taxes will depend on household income levels. Just fifty percent of your benefits will be taxed if your income is between $25,000 and $34,000 as an individual. That goes up to $32,000 to $44,000 for a married couple, still another example of the marriage penalty.
Hopefully, everyone reading this will have more income than that to live off in retirement. If so, 85% of your Social Security benefits will be taxable. That is assuming you have an income in retirement above $34,000 (individual) or $44,000 as a married couple.
End of Two Great Social Security Maximization Strategies
File and suspend was a great social security maximization strategy that is no longer available to younger Americans. The last few baby boomers who were grandfathered into eligibility will turn 70 in 2020. Seventy is the latest you can wait to start your Social Security benefits.
Whatever your age, take a moment and register for access to your Social Security Benefit estimates. Visit ssa.gov, just take a few minutes and you will be able to find more information about Social Security, and more importantly, what it will mean for your retirement.
Think about your Social Security benefits when you vote in 2020 as well. With record deficits and the skyrocketing national debt, there are often cuts to programs like Social Security and Medicare.
At Tacoma Elder Care, we are always working on ways to help you. If you are just beginning to think about your planning, we highly recommend attending one of our FREE workshops to learn more about how to start, and the most important documents everyone needs to have in place. Contact us today to register, or to schedule a FREE consultation.
The rules can be complicated, and but it’s smart to want to maximize your benefits if you’re married.
If you’ve been married to your spouse for at least one year, you can collect benefits on the earnings of your spouse, even if you don’t have a work history of your own. This is called a spousal benefit.
However, you can’t claim a spousal benefit unless your spouse has already filed for their retirement benefit.
If you’re eligible to collect retirement benefits on your own, as well as spousal benefits, Social Security will essentially pay you the higher of the two. For example, if one spouse’s retirement benefit is $1,000 per month, but his or her spousal benefit is $1,200 per month, the higher spousal benefit would be paid.
Under Social Security rules, each of us has what’s known as a “full retirement age,” or FRA. Your FRA depends on the year you were born. For most of us, the FRA is between age 66 and 67.
The other key term to know is “primary insurance amount,” or PIA. That’s the amount that Social Security calculates to be your monthly retirement benefit at your full retirement age.
Regardless of your FRA, you can begin collecting Social Security retirement benefits as early as age 62. The same is true of spousal benefits, but if you take either benefit earlier than your FRA, the benefit amount is permanently reduced by a percentage of the applicable primary insurance amount.
The reduction can be as high as 30 percent at age 62, and for the spousal benefit the reduction is even more, as much as 35 percent.
On the other hand, if you wait to begin collecting retirement benefits until after your FRA, the PIA will increase by 8% every year up to age 70. Benefits stop increasing at age 70, so there’s no advantage to waiting beyond then. Spousal benefits, however, do not increase past your full retirement age, even though they’re reduced if you collect them early.
If you are eligible for both a spousal and a retirement benefit, and you file for either one, you’re deemed to have filed for both benefits and automatically receive the higher of the two.
For example: If your PIA is $2,400 per month at age 67, but you start to collect it early at age 66, your monthly benefit would be reduced to about $2,267. Your spouse’s spousal benefit, however, would still be computed as 50 percent of your PIA of $2,400, or $1,200 per month. How much of that your spouse receives, however, depends on the age at which they apply for the spousal benefit.
Regardless of whether you wait or start collecting early, you still need to consider things such as cash flow, your health, and if you’ll be prepared if one of you becomes ill and needs long-term care.
We highly recommend setting up a FREE consultation with us at Tacoma Elder Care. We can walk you through all your options to make sure you are prepared for all situations regardless of when you choose to retire. Retirement should be fun and relaxing, which means having a plan in place.
Call today to schedule a FREE consultation, or register for one of our FREE Workshops.
“Many American workers plan to rely on Social Security benefits as a steady source of income in retirement. If you are not on top of things, you are at risk for not using the right claiming strategy. If that happens, you could leave thousands of dollars on the table over your lifetime.” Explains Karen Price Mueller, of NJMoneyHelp.com
If you are approaching retirement, or if you’ve already retired, consider these strategies. There was recently an article discussing, “Social Security claiming strategies,” by CNBC, is worth referencing.
Prolonging Social Security payments, or stopping your checks, is one strategy that could pay off in the long term. If you claim retirement benefits at the earliest age possible (62), you take a permanently reduced benefit. It’s about 75% of what you are entitled to. However, if you wait until full retirement age (66 or 67), depending on when you were born, you’ll get your full benefit. If you delay your benefits even longer, you get an 8% bump for every year you wait up until age 70. In all, that’s a potential increase of 32%! If you already took your Social Security benefits at 62, you can still change your mind and stop the checks until you reach 70.
Another plan is to stop filing based on your spouse's record. A 2015 law permanently limited the number of retirement strategies available to beneficiaries. However, a restricted benefits application has been grandfathered in for certain claimants. The key date is January 1, 1954. If you were born on that date or earlier, you can still take advantage of this! Therefore, if you are eligible for benefits on your spouse or ex-spouse's record, you can file for spousal benefits at full retirement age and allow your own retirement benefits to grow until age 70. Even if you divorced, you could still be eligible for divorced spousal benefits if your ex dies, provided you didn’t remarry before age 60.
Finally, it’s important to note, that you can receive a penalty if you collect retirement benefits and continue to work, based on your age. If you are under full retirement age, for every $2 you earn above that threshold, the Social Security Administration deducts $1 from your benefit payments.
To learn more about Social Security claims and your retirement plans, join us for one of our FREE Workshops, where you can learn many strategies to protect you and your loved ones as you move towards retirement. Tacoma Elder Care in Tacoma, WA, is here to assist you in all your estate planning and Elder Care needs. Call us today!