Calhoun County, AL – As a Financial Planner, you often help clients plan for retirement. A major piece of that planning process involves Social Security benefits. When asked about when to begin receiving Social Security benefits, my answer is always the same: “It depends.” There really is no perfect answer when making that decision on when to start taking your benefit, mostly because nobody knows how long they will live. Many variables come into play that influence this decision, including your health, monthly income needs, and previous longevity in your family. However, the reason for writing this article is to explain some of the basics of Social Security benefits.
Starting Early vs Later
For those that are eligible to receive Social Security benefits, they have the option to start receiving their benefit as early as Age 62 and as late as Age 70. Most will reach what Social Security defines as “Full Retirement Age (FRA)” around Age 66 or 67, depending on your date of birth. Your FRA benefit is considered your full benefit amount, neither reduced nor increased. If you start your benefit prior to FRA, your benefit will be reduced, whereas starting your benefit after FRA results in an increased benefit. Starting your benefit at Age 62 means your benefit would be reduced by about 25% – 30%. For each year you wait to take your benefit after reaching FRA, your benefit increases by about 8% annually.
Spousal Benefit
Spouses of a Social Security recipient may have a couple options. One is to simply receive their own Social Security benefit through their own earnings record. However, if their spouse’s benefit is significantly larger than their own, then they may have the option to take a spousal benefit. If 50% of the Social Security recipient’s benefit is still larger than their spouse’s own benefit, the spouse may be entitled to that 50% benefit amount. It should be noted that this 50% benefit is based on taking it at FRA. The spouse may elect to begin taking their spousal benefit at Age 62, but it would be reduced. It should also be noted that divorced spouses may be eligible to receive a spousal benefit if certain requirements have been met.
Widows and widowers of a Social Security recipient are entitled to 100% of their deceased spouse’s benefit at their own FRA, if it’s larger than their own benefit amount. However, although the benefit would be reduced, a Survivor’s benefit for a widow can begin as early as Age 60.
Earnings Test
For those that begin receiving Social Security benefits prior to reaching FRA, it’s important to remember that your earned income from employment could possibly reduce your benefit. In years leading up to your FRA, your benefit could be reduced $1 for every two dollars over the earnings limit. For 2022, that earnings limit is $19,560. In the year you reach FRA, your benefit could be reduced $1 for every three dollars over the annual limit, which for 2022 is $51,960. Once your reach FRA, there is no cap on your earned income in the years going forward that would reduce your benefit.
A Financial Planner may be able to guide you in the right direction when deciding at what age you should start receiving your benefit. For more information regarding Social Security benefits, you can visit the Social Security website here.
Editor’s Note – Jonathan T. Jones® is a local financial advisor who will be a contributing author for the Calhoun Journal. He will be writing financial pieces to help readers understand the market and many changes that are currently happening in the financial world.
Jonathan T. Jones, CFP®
Wealth Manager/Financial Advisor, RJFS
501 Quintard Avenue, Suite 17
Anniston, AL 36201
256-237-2300
Any opinions are those of Jonathan Jones, CFP® and not necessarily those of Raymond James.
Securities offered through Raymond James Financial Services Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Wealth and Retirement Services is not a registered broker/dealer and is independent of Raymond James Financial Services.
