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When Are You Eligible for Social Security Benefits?

February 23, 2023

Have you recently turned 62? Happy birthday! You can now opt to receive Social Security benefits. There are advantages and disadvantages to receiving them in the first years of eligibility. We dive in here.

It can be tempting to start collecting social security as soon as you are eligible, but there are some things you will want to consider before opting to receive. We provide our answers to common questions and important considerations upon planning for your social security benefits in retirement.

At what age should I sign-up for Social Security?

Once you turn 62, you have the option to opt in for social security benefits. Under federal regulations, you must be at least 62 for the entire month to start receiving benefits. You have until age 70 to take advantage of SS benefits. Some people decide to start collecting their social security right at 62, due to financial reasons, marital status, and other personal circumstances.

Starting to receive benefits at age 62 is an attractive option for some, as they are able to collect benefits for a longer period….but at a reduced amount.

If you postpone taking your benefits until your full retirement age (65-67), then you will be rewarded with a higher benefit: 8% for each year up to age 70 (for those born in 1943 or later), when benefits max out and there is no further incentive to delay signing up. This option may be smart if you are still working through your mid 60s and are willing and able to receive your benefits in the future years.

How are my benefits taxed at the Federal level?

Your social security benefits may be taxed differently depending your tax-filing status, and your other sources of income.

Up to 85% of your benefits are includible in your taxable income under two circumstances:

  • If you file your federal tax return as an “individual” and your combined income*is greater than $25,000.
  • If you file a joint return and you and your spouse have “combined income”* greater than $32,000.

*The “combined income” for social security taxability purposes is the sum of your adjusted gross income, tax-exempt interest income, and 50% of your Social Security benefits.

How do benefits differ when single versus married?

There is no impact on your retirement benefit whether you are married or not since it is solely based on your individual work record and earnings history. Your social security retirement benefits are separate from your partners, and the amounts do not limit each other. It is a common assumption that they are joint, but the benefits are collected separately on your behalf.

For spouses who did not work and contribute to social security, they can elect to collect benefits based on their spouses record. This generally ranges between one-third and one-half of their spouse’s Social Security benefit.

If you decide to collect on the record of a deceased or former spouse, it could affect benefits. However, most widows and widowers can collect survivor benefits on a late spouse when they turn 60 (decreased to age 50 in the case of a living spouse with a disability). However, if they remarry before that period, the benefit is terminated. The same system is in place if you are divorced and collecting survivor benefits on a deceased former wife or husband. These payments will end if you remarry at any age and only become available if you are or become single.

What other relevant factors should I consider?

Before deciding the age in which you will receive your benefits, there are some factors to think about.

  • The amount you first receive from your benefits sets the amount that you will get for the remainder of your life.
  • Are you still planning to work? If you decide to work while collecting your social security benefits, there are specific limits on how much you can make between the age of 62 to your full retirement age while still maximizing your benefits. Once full retirement age is met, the earnings you receive have no effect on your benefits.
  • What is your life expectancy? Considering your family history, personal health and lifestyle will assist you in your retirement planning decisions and when to collect your benefits.
  • What other sources of income do you have to provide the same cash flow? If you think of your Social Security benefits as another pool of assets that is giving you a guaranteed rate of return of 8% on your money if you delay collecting, this may inform your decision on when to begin collecting.

Questions? Wondering when you should opt to receive SS benefits? Contact KLR Wealth Management, LLC.

Be sure to check out our whitepaper, “Financial Planning for Every Stage of Your Life”, where you can find useful information about the next steps to take as you approach each milestone.

Investment Advisory Services offered Through KLR Investment Advisors LLC

951 North Main St, Providence, RI 02904

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