Tag: Social Security Administration

Posted on by Jan Roberg

Why Social Security Wants You to Retire at 62

Social Security and early retirement

If you are going to life past that age of 83, then Social Security comes out ahead if you take your retirement benefits early.

 

Social Security would rather have you retire at age 62 than at your full retirement age.  That sounds a little backwards, but it’s all about money.  (Of course!)

 

When Social Security started back in 1935, the average person died before ever claiming any benefits.  Now, people are living longer than ever and Social Security payments continue through the end of your lifetime and even beyond for widow(er) benefits.

 

So, if the Social Security Administration is paying out so much money, why would they want you to retire early?   Let’s do the math.  (Don’t worry, I’ll keep it simple.)

 

Frank has worked all his life and he’s tired.  He doesn’t have to, but he’s thinking about retiring at 62 so he can spend more time with his wife, Delores.  If Frank retires at his full retirement age of 66, his monthly Social Security benefit would be $2,000 a month.  If he retires at age 62, he’ll get $1,500 a month.

 

So the first round of math is going to be–how much does Frank get before he ever turns 66?  He’s got 4 years of benefits, 12 months in a year, at $1500.  So he gets $72,000.

 

$1500 per month x 12 months =  $18,000 per year

 

$18,000 per year times 4 years = $72,000 per four years

 

So at first blush, it makes a whole lot of sense for Frank to take the money and run.

 

If Frank waits until he’s 66 to start claiming Social Security benefits, how long would it take for him to make up the $72,000 that he’s lost by waiting?  He’d catch up at age 77.   So if Frank’s family has a history of dying young–it might not make sense for him to wait until he’s 66 to retire.  You can do that math with different numbers, but generally it will take 12 years to catch up to your benefits.

 

But what if Frank comes from a family with an average life expectancy of 90 years?  What then?

 

Remember, by retiring early, Frank loses 25% of his payment every month.  In this case, that amounts to $6,000 a year ($500 a month x 12 months). So if Frank catches up at age 77, then he’s got 13 more years with $6,000 a year extra, now Frank is ahead by $78,000.

 

According to Social Security Statistics, the average person today lives to be 83 years old.  Going by the numbers, Social Security saves money on people claiming their benefits at age 62.

 

This is a very simplified example.  Frank has many things to think about–his wife’s benefits, what if he waits until age 70, how long does he expect to live?  What other benefits might he be entitled to?  Social Security won’t tell you all of your options.  If you call them to file for benefits, they take your application and you’re done.

 

At Roberg Tax Solutions, we’ll sit down with you and chart out your benefits so that you know all of your options.   At the end of the day, the decision is yours, but you deserve to know what all your options are before you have to make that decision.

Posted on by Jan Roberg

How to Check Your Social Security Annual Statement (And Why You Want To, Even if You’re Only 18)

Photo by 401(K) 2012 at Flickr.com

 

“Social Security, that’s for old people.  Social Security won’t even be around when I retire.”

 

Let’s look at that second statement first.  Social Security won’t be around when you retire.  That’s what I was told back in college thirty years ago.  “There will be no more Social Security by the time you retire, you’re just paying in and you’ll get none of it back.”  That was Gospel when I was 20 but Social Security is still here.  We’re still being told doom and gloom stories and granted Social Security is not perfect.  I wouldn’t plan on it being my only source of retirement income—but I suspect that it’s going to be around for a long time so you need to make sure your Social Security records are right.

 

Now I agree that Social Security is mostly for old people, but it also affects your payments should you become disabled and your spouse’s and children’s survivor benefits should you die.  We don’t want those things to happen, but Social Security is there for those situations.

 

The reason you want to check your Social Security statement every year is to make sure that the wages you earned are listed correctly.  Most of the time they’re right but not always.    Usually if there’s a mistake, it happens in a year when you received two or more W2s.  Sometimes they’ll report one or the other but not add them together.  Other mistakes are possible, but that’s the most common one.

 

Here’s why it’s important—Did you know that Social Security uses your top 35 years of wages and self employment to figure your Social Security benefits?  Thirty-five years!  That’s fine if you graduated from college, got a good job, and worked steadily until you retired.  That will give you 35 years and then some, easy.

 

For the rest of us, life happens.  We get laid off, we have babies, and maybe we start our own businesses and have negative income for awhile.  We get some zeroes on our Social Security statement.   Never in a million years would I have dreamed that the $2.50 an hour job I had back in 1976 would affect how much money I’d get for my Social Security retirement benefit.  But it will—because that $2.50 an hour job is better than some of the zeroes that will be affecting my Social Security statement.

 

So how do you go about checking your Social Security statement?  First you’ll need to set up an account with the Social Security Administration.  Go to the website:  www.ssa.gov .  On the left hand side of the screen, you’ll see a picture of a lock and it will say “My Social Security”.  That’s where you’ll create your account, or log in if you already have an account.

 

When you set up your account you’ll need your name (as it appears on your social security card), your social security number, and mailing address.  You have to have a valid email address to set up the account.  You also have to be at least 18 years old, so if you’re only 16 and working, you won’t be able to verify your employment yet.

 

One thing the Social Security website is really good at is security.  They’re going to ask you questions to identify yourself.  Be prepared to freak out a little by how much they know.   The SSA gets the information off of your credit report to generate the questions.

 

Once you’ve got your account set up, you can go in and look at your Social Security Statement.  Here’s a sample one that you can see:  http://www.socialsecurity.gov/myaccount/SSA-7005-OL.pdf

 

Page 2 shows how much your payments would be at retirement, assuming that you continue working at your current income.  It also shows what your disability payments would be if you became disabled today and benefits your spouse or children could receive if you die.  If you haven’t worked long enough to qualify for benefits yet (generally 10 years) it will tell you that too.

 

Page 3 will give you a breakdown of the wages that have been reported over the years.  2012 wages should be posted now.  It’s a slow process; the annual wages that you report on your tax return in April don’t show up on the Social Security Statement until September.  So now’s a good time to check.  If you find a mistake, you’ll need to contact the SSA and notify them.  Usually you’ll need to prove the error by providing them with copies of your W2s.

 

See why it’s a good idea to do this once a year?  Who keeps W2s for 35 years?  (No, I don’t.  You were thinking geeky accountants weren’t you?)

 

Make sure you keep your Social Security user name and password in a safe place.  You’re going to want to access the account once a year and just check the information to make sure it’s accurate.  Labor Day is a good time to check—it’s a celebration of workers, and your Social Security statement is your documentation of your years of working.  (Okay, it’s because the information gets posted in September, but that’s not as easy to remember.)

 

For Labor Day, check your wage history at www.ssa.gov.

Posted on by Jan Roberg

What Every Divorced Woman Needs to Know About Retirement: Social Security

Ex-spouses may claim Social Security based upon their exes' earnings.

If you’re divorced, but were married for more than 10 years to your ex-spouse, you may be able to claim Social Security benefits based upon his income.

 

This may come as a surprise to you, but your ex-husband could turn out to be good for something after all. If you were married for at least 10 years, you may be entitled to Social Security benefits based upon your ex’s income—that is, if he’s entitled to Social Security benefits.

 

Here’s how it works: let’s say you’re thinking about retiring. You go to the Social Security website and find out what your benefits would be if you retire at 62, if you retire at your full benefit age, and if you retire at age 70. Then you call Social Security to find out what your benefits would be if you used your ex’s Social Security benefits. The number is (800) 772-1213. If you retire at 62, you can get 35% of his benefit; at full retirement age, you can get 50% of his benefit.

 

Let me show you with an example: Jane is 60 years old and she’s contemplating what she wants to do about retiring, whether to start taking benefits at 62 or hold out until later. She runs the numbers on the Social Security website ( www.ssa.gov )  and gets the following information:

 

  • Retire at 62, monthly benefit: $ 585
  • Retire at 66, monthly benefit: $ 820
  • Retire at 70, monthly benefit: $1,040

 

Those aren’t great numbers. Jane didn’t always work because she was raising a family, and when she did work, well, she didn’t make all that much money. But Jane’s ex-husband, Tom, made plenty of money. Using the Quick Retirement Calculator at ssa.gov: http://www.socialsecurity.gov/OACT/quickcalc/index.html.

 

Jane estimates Tom’s Social Security earnings will be $2,586 per month at retirement. Now she’s going to want to actually talk to the Social Security folks to get the real numbers, but the calculator will give her a rough idea.

 

So, if Jane retires at 62, she can qualify for 35% of Tom’s money which would be $905 per month. If she waits until her full retirement age, she can qualify for 50% of Tom’s money which would be $1,293. For Jane, she can make more money retiring using Tom’s benefits than she can make on her own.

 

This is really important to know:

  • Your ex-husband will not lose his Social Security benefits if you use them
  • You cannot be currently remarried and qualify for your ex’s benefits
  • If you have had more than one marriage that lasted for over 10 years; you may use the spouse that gives you the greater benefit

 

If you claim Social Security based upon your ex-husband’s benefits before you reach full retirement age you will not be able to switch back to your full benefit at age 70. You really want to think long and hard about those numbers before you retire early.

 

What you’re eligible to receive from Social Security is very personal. It’s all based upon your individual contributions, you can’t make any assumptions based upon what your friends or neighbors get. You can learn what you’re eligible for by creating your own account at the Social Security website. It only takes about 10 minutes. Finding out about benefits from an ex-spouse will take a bit longer because it involves a phone call and the hold times can be pretty long. Isn’t it worth finding out?