Social Security Benefits - Frequently Asked Questions
Hi everyone, my name is Tan and I am an independent CERTIFIED FINANCIAL PLANNER™ practitioner. I often get asked about Social Security benefits from clients and my friends’ parents. Here are some frequently asked questions on Social Security benefits.
Will Social Security benefits go away?
In my personal opinion, I don't think Social Security benefits will go away because there are a lot of tools the government can use to make Social Security benefits last.
- For example, first, they can increase Social Security taxes (instead of 14.4%, increase it to 15.4%).
- Second, they can reduce Social Security benefits (instead of $1,000 a month, reduce it to $900 a month).
- Third, they can increase the early eligibility age (instead of 62 years old, make it 63 years old).
- Fourth, they can increase full retirement age (instead of 67 years old, make it 68 years old).
I am currently collecting benefits, can I change my mind?
“If you are receiving Social Security Retirement benefits and you change your mind about when they should start, you may be able to withdraw your Social Security claim and re-apply at a future date. However, if you change your mind 12 months or more after you became entitled to retirement benefits, you cannot withdraw your application. You are limited to one withdrawal per lifetime.” (1)
Where can I find my benefits?
You can go to www.ssa.gov to sign-in to my Social Security. If you have never logged in, click on “Create An Account” and follow the steps. If you forgot your username and/or password, you can reset it. If you know your username and password and able to login, that’s great.
When you are logged in, look for the PDF statement. It shows you many benefits, including when you are eligible to start collecting reduce Social Security benefit, know what your full retirement age is, and the maximum delay benefit. You can click here to view the 2018 sample Social Security statement provided by Social Security Administration.
What happens if I work and collect Social Security benefit?
If you collect Social Security benefit before full retirement age and make more than the annual earning limit, Social Security will reduce your Social Security benefit. If you collect Social Security benefits after full retirement age, Social Security will not reduce your benefit regardless of how much you make. (2)
Be aware that there is a difference between reducing your Social Security benefits and taxing your Social Security benefits. Each rule could have different annual limits. This is directly from the Social Security Administration website. Taxing Social Security benefits is “some people who get Social Security must pay federal income taxes on their benefits. But, no one pays taxes on more than 85 percent of their Social Security benefits." (3)
When should I collect Social Security benefits?
My answers vary because it depends on your health, net worth, cash inflows and outflows, family health history, what are you planning to do to with the monthly benefits, etc.
Here are some things to keep in mind.
- One, the surviving spouse gets the higher of their Social Security benefits or the deceased Social Security benefits.
- Two, look at the current status of the Social Security Trust Funds. You can click here to learn more. The link works, but if it doesn’t because Social Security updates their site, you can Google “Social Security Trust Funds.” Make sure it’s a ssa.gov website.
- Three, if you are planning to collect Social Security benefits before full retirement age.
Ask yourself these questions.
1. What other assets do I have?
2. Am I collecting benefits because I can or I need the money to live?
3. Am I planning to work before full retirement age?
4. How is my current health?
5. What is my family history of longevity and health?
6. If I have a spouse, what is the age difference? How are their health? Are they planning to work before full retirement age?
7. What incomes and expenses do I have at retirement?
The key takeaway is we don't know what will happen to Social Security benefits, but the current 7% or 8% increase annually (depending when you are born) after full retirement age and inflation protection makes delaying very appealing.
Thank you for listening. Until next time. This is Tan, your trusted advisor.
References
(1) - https://www.ssa.gov/planners/retire/withdrawal.html
(2) - https://faq.ssa.gov/link/portal/34011/34019/Article/3739/What-happens-if-I-work-and-get-Social-Security-retirement-benefits
(3) - https://faq.ssa.gov/link/portal/34011/34019/Article/3831/Must-I-pay-taxes-on-Social-Security-benefits
ADDITIONAL RESOURCES
“Avoid late enrollment penalties
● It’s important to sign up for Medicare coverage during your Initial Enrollment Period, unless you have other coverage that’s similar in value to Medicare (like from an employer). If you don’t, you may have to pay an extra amount, called a late enrollment penalty.
● Late enrollment penalties:
- Are added to your monthly premium.
- Are not a one-time late fee.
- Are usually charged for as long as you have that type of coverage (for most people, that’s a lifetime penalty). The Part A penalty is different.
- Go up the longer you wait to sign up – they’re based on how long you go without coverage similar to Medicare.”
https://www.medicare.gov/basics/costs/medicare-costs/avoid-penalties
This material is for educational use only and does not constitute tax, legal, or investment advice. Information may be changed or updated without notice. Consult with a licensed professional regarding your personal circumstances.
Please do not excerpt or copy this information without prior consent from TAN Wealth Management.