Social Security: 8 Facts You Need To Know

…An annual quiz from Mass-Mutual that tests the public’s knowledge about Social Security…has 13 true or false questions…and the results consistently show the average person knows little about these government benefits, with 65% of quiz takers receiving a grade of D or lower. That’s a problem because what you don’t understand about Social Security could cost you. Here are eight facts worth knowing. @$$4$

A slightly edited original article written by David Rodeck (kiplinger.com)

1. You Can Collect Social Security Based on a Spouse’s Earnings
   • There are three potential Social Security benefits for married people:
     • the one based on an individual’s own work history;
     • a spousal benefit, which can be up to 50% of what a higher-earning spouse receives at full retirement age (67 for those born in 1960 or later);
     • or a survivor benefit worth up to 100% of a deceased spouse’s last payment.
     • You are entitled to only one benefit — whichever is higher — at a time, and you can claim a spousal benefit only if your spouse has filed for Social Security…
2. Benefits Are Reduced If Claimed Early
   • Although you can claim Social Security as early as age 62, your payments increase 8% each year you delay before maxing out at age 70. Many retirees claim as soon as possible figuring they should get something while they can, but doing so locks in a smaller benefit for the rest of your life. It’s especially important to increase your monthly payout if you earn more than your spouse or if you’re likely to live longer.
3. Waiting Until Age 70 Isn’t Always the Best Move
   • At the other end of the spectrum are people who delay benefits as long as possible. A lot of people think they’d better wait until age 70 no matter what but during this time, they’re missing out on income that they could use and invest. For example, someone eligible to receive $2,800 at age 67 forgoes more than $30,000 a year by waiting.
   • Sure, delaying increases your payment, but it also takes time to break even and come out ahead. The break-even point for someone delaying payments from age 67 to 70 is roughly age 82. Only about half of retirees live that long.
   • There’s no single “right” time to claim Social Security. The ideal age generally depends on your marital status, health and the need for retirement income.
4. Social Security Can Take Back Benefits If You Continue Working
   • Earned income can reduce your benefit if you’re younger than your full retirement age, but taxable income from a retirement plan or investments won’t affect it.
     • People younger than their full retirement age can earn up to $19,560 in 2022. Social Security reduces the benefit $1 for every $2 you earn over the limit.
     • The year you reach your full retirement age the earnings limit is more generous. Then, you can earn up to $51,960, and Social Security takes back only $1 for every $3 earned over that limit.
     • The month you turn full retirement age, the earnings limit disappears….but you get it back as a larger Social Security benefit once you stop working. Still, the earnings restrictions can spring a nasty surprise on someone who is unaware of the rules.
   • Social Security adjusts benefits based on earnings only once a year, so it takes time before the agency discovers you’ve earned more than the limit and holds some of that money back and during that time, as the income starts coming in, gets embedded in your spending, it all of a sudden gets cut off and, adding to the pain, you also will owe the IRS for all the benefits Social Security paid you before it started cutting some of that money off.
5. Timing Matters for a Divorce
   • If divorced, you may be eligible for a spousal or survivor benefit based on your ex’s earnings history when you retire. The marriage must have lasted at least 10 years and you cannot have remarried.
   • …If you’re going through an amicable divorce and are nearing the 10-year mark, it’s worth asking your soon-to-be ex-spouse to postpone the proceedings until that turning point has passed.
6. Non-U.S. Citizens Can Collect Benefits
   • …If you’re legally able to work in this country and you pay payroll taxes, those benefits belong to you.
7. Benefits Will Shrink If Congress Doesn’t Act
   • Currently, Social Security has enough money to pay scheduled benefits in full only until 2035. Without additional funding from Congress, payments could drop 20% or more…Some people might see the potential shortfall as a reason to claim benefits early but, as mentioned above, that would hurt their lifetime retirement income in the process.
8. Social Security Lets Early Claimers Do Things Over
   • If you’re already collecting Social Security and wish you had held off, you have a shot at a do-over. If you claimed before your full retirement age, you can reverse the effects by withdrawing your application…within one year of starting payments…and you would need to pay back everything you collected from Social Security up to that point, including any benefits a family member received based on your earnings record. Doing so lets you reapply at a later age for a larger benefit.
   • If you’re past your full retirement age, you can take a voluntary suspension. This pauses your Social Security payments until you restart them; they grow every year you delay. When you suspend, you don’t have to pay anything back, but you will need to cover your Medicare premiums out-of-pocket instead of having them deducted from your Social Security check.