Pension in the USA: terms, amounts and facts you need to know
Social security is not a very clear program. In fact, the 2019 survey found that people aged 50 and over thought they could receive full Social Security benefits at an average of 63 years old. Why is this not so and what other nuances exist, the publication said Money Talks News.
About 21% of married couples receiving social security benefits and about 45% of unmarried couples rely on social security for 90% or more of their income.
Knowing some of the rules will make you more money.
1. Your benefit is based on the highest income 35 years
Social Security calculates your monthly checks using a formula that uses the 35 years with the highest income, which is the 35 years you had the highest income. If you lack several years of work to make it to 35, the missing years are replaced with zeros, which reduces your potential income.
So, if possible, it is worth working for at least 35 years. The more years of high pay in your formula, the larger your monthly checks can be.
Check your income account once a year to make sure the Social Security Administration has correctly recorded your income. Do it by logging into your account Social security or by registering.
2. Your benefits may be taxable
You will be surprised to know that your Social Security income may be taxed. About half of retirees pay federal taxes on their income.
And that's not all. Many states tax social security income on at least some residents.
3. You can apply for benefits from the age of 62
The earliest age at which you can start receiving Social Security benefits is 62 for most people and 60 for survivors.
The largest proportion of Americans - about 35% of men and almost 40% of women - can receive a pension from the age of 62.
Keep in mind that early withdrawals will incur a penalty, which you will pay by receiving smaller monthly checks for the rest of your life.
Although there are circumstances when you have little or no choice. For example, you need money to survive.
4. Your total benefit amount is tied to your full retirement age
Full retirement age (or FRA) is a technical term in the context of social security. It refers to the age at which you are eligible to receive the full amount of your monthly benefit, that is, without any early appeal penalties or without any grace period bonuses.
That is, receiving benefits before reaching full retirement age means your monthly benefit will be reduced by as much as 30%. Applying after reaching the FRA means your monthly benefit will increase by 8% for each year that you do not receive benefits until you turn 70.
What is your full retirement age? It depends on your year of birth, but for most people it is 66-67 years old.
5. Your spouse's work experience can help you too
Understanding your options will really pay off with social security. For example, if your spouse or ex-spouse earns more than you do, it may be better for you to claim spousal benefits based on your spouse's income data instead of claiming it based on your own work history.
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If you were a housewife, received low wages, or did not work for very many years, you can receive up to half of your spouse's or ex-spouse's monthly benefit. In the case of a former spouse, as a rule, you must have been married to that person for at least 10 years and also meet other conditions in order to qualify for spousal benefit based on their income.
This is yet another case where researching and planning a social security application strategy is an investment in your future.
6. Filing a claim will not affect the total amount of the payment
As you now know, the initial payments at age 62 make your monthly checks smaller than if you had waited. But whether you start earlier (and get smaller checks) or later (with larger checks), you should receive roughly the same total payout over the course of your retirement.
The social security system was designed to work this way.
On the subject: 4 social security traps in the US and how to avoid them
This does not mean that there is no good reason to wait - ideally even up to 70 years, if possible. If Social Security will make up the majority of your retirement income, the larger waiting checks you get will have value for your quality of life in old age.
7. You can still get survivor's benefit even after you remarry
The remarriage rules and remarriage benefits sometimes confuse people, likely because your age at the time of remarriage is an important part of the equation.
Survivor's benefit allows a widow or widower to receive up to 100% of the deceased spouse's social security benefit. You can usually claim this benefit as early as age 60, but the amount will be reduced if you apply for this benefit before you reach your full retirement age.
What if you marry / get married again? Again, this depends on the age at which you do it.
The Social Security Administration explains: “You generally cannot get widows benefit if you remarry before age 60 (or 50 if you are disabled). But remarriage after age 60 won't stop you from getting your ex-spouse's benefits. And after age 62, you can get your new spouse's allowance if it is higher. ”
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