Four confusing rules that can reduce your US pension

The Social Security Administration has introduced many rules that can affect pensions. Some of them may seem strange, and some of them may negatively affect your payouts. GoBankingRates.

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Relying solely on Social Security in retirement is a losing position for most Americans. The average payment — about $1833 per month, according to the AARP — is not enough to provide a comfortable retirement.

Your pension situation can get even worse if you are affected by certain Social Security rules, which may seem a bit odd. Here are four of them.

On the subject: Pension in the USA: a complete guide on how to secure a decent old age in America

1. Benefits decrease if you have been employed for less than 35 years

Social Security benefits are based on average indexed monthly earnings over 35 full years of service. The highest paid 35 years are used in the calculations. If you work the full 35 years, you can maximize your retirement benefits. If you have been working for less than 35 years, your benefit will not be as high, no matter how much you have earned in your career.

2. Working in retirement can reduce your benefits

There are no rules that prevent you from continuing to work and earn income even after you have applied for retirement benefits. But it may reduce your monthly payment. When you start receiving retirement benefits, you are "considered a retiree" in the eyes of the SSA, according to the website.

You can receive your Social Security or Survivor's Benefit and work at the same time. However, there is a limit to how much you can earn and still receive all the benefits.

If you are under full retirement age, for the entire year you receive extra income, SSA deducts $1 from your benefits for every $2 you earn in excess of the yearly limit. In 2023, this limit is $21.

In the year you reach full retirement age, SSA deducts $1 in benefits for every $3 you earn in excess of another annual limit. In 2023, that limit is $56. SSA only calculates your earnings for the month before you reach full retirement age, not for the entire year. For example, if you were born in July, then your earnings until June will be taken into account, and not until the end of the year.

3. If you apply early for retirement benefits, you may be left with a lower benefit permanently

You can apply for a pension as early as age 62, but the earlier you apply, the lower your monthly payment will be.

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If you apply early and then regret your decision, you can withdraw your application for benefits, but only within 12 months of your original application. If you want to withdraw your pension application, you must be prepared to return the full amount of benefits you received. However, after a year has passed, you can no longer withdraw your application.

4. Spouse's pension cannot be claimed until he/she applies for Social Security

If your spouse is the primary or sole breadwinner in your household, you may be eligible for spousal welfare benefits based on their years of service and salary. However, you cannot start receiving spousal benefits until your spouse files their own Social Security application.

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If you received income at a younger age, you may be able to claim a pension based on that income before you apply for Spousal Benefit. Even if your earnings were minimal during your working career, this is a good strategy if your spouse is delaying getting their benefits.

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