Sunday, August 2, 2015

Retirement Basics: Social Security Retirement Basics

Many of you work in certain industries where individuals are left to  their own devices regarding taxes and the reporting of income.  It is tempting to leave much income "off the books" for a number of reasons (one being to avoid "paying in" come tax time).  This is a dangerous choice.  Not only is illegal, but it can cost you dearly in the future.

At some point in life, you may want to retire.  I know for many of you, this is pretty far into the future, but claiming your income correctly is one simple step in retirement planning.  The income that you earn and report now, will impact your social security benefit at retirement.

Social security offers a retirement benefit that can seem confusing to navigate.  Here are some of the Social Security Retirement basics.

  1. You must work for 10 years.  Social Security Retirement Benefits operate on "credits."  You must have a minimum of 40 credits in order to be eligible for retirement benefits.  If you do not earn 40 credits in your working years, you will not be eligible for a social security check.  You can earn up to 4 credits per year that you work.  You must have earned $1220 (in 2015) to have earned 1 credit. 
  2. If you die, your dependents may collect your social security.  Again, you must have collected enough credits, but assuming that you have, you qualified dependents can collect your benefit.  See special rules about who might be a qualified dependent for purposes of social security retirement benefits.
  3. The minimum age that you can collect your retirement benefit is 62.  This being said, you can file for this benefit at age 61 and 9 months.  Age 62 is considered "early retirement" and results in  a retirement benefit that is approximately 25% less than it would be at full retirement age.
  4. Your spouse can claim your benefit even if he/she has never worked.  This assumes that you are either collecting your retirement benefit, or are eligible for it.  Your spouse must be at least 62 years of age in order to collect.  You can collect your own benefit at the same time.  So, both individuals can be collecting a retirement check based on one person's benefit.
  5. "Full Retirement Age" is 67 years old for those who were born in 1960 or later.
  6. If you suspend your social security payment at full retirement age, you will receive a higher benefit by 8% each year plus it will be recalculated based on any earnings that you had in that time frame (until you reach age 70)
  7. Automatic payments begin at age 70.  If you haven't begun to collect your benefit by this time, they will kick in automatically.
  8. A special "trick" for married couples...  If you and your spouse are both full retirement age, one of you can apply for their retirement benefit and suspend the payment.  Then the other can apply for only the spousal benefit.  This allows both individuals to delay collecting their own benefit, which will also result in a higher payment once collected.
I know that was a lot of information, but understanding the basics of how your retirement benefit works is really important.  There is also a Medicare benefit to consider, but we will leave that to a future post.  Right now, there are a few things that you can do.
  1. Report all earned income on your taxes.  You must pay in to social security in order to collect in the future.
  2. Read your annual statement.  Social security provides you with an annual statement.  This provides you with important information.  It tells you if you have enough credits to qualify, how much you can expect your payments to be at various ages, and much more.
  3. Research exceptions, special rules, and payout calculators on the government's social security website.  This will give you the most accurate information that pertains to your specific situation.  This website is  It is a terrific website, and has a lot of information that has been used in this article, and more.

 A few simple steps will ensure that you qualify for a retirement benefit, maximize your payout, and get the most out of your social security retirement benefit.

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