YOUR QUESTIONS ANSWERED BEFORE YOU RETIRE

This message queries this week center on Social Security payments.

 

Q. I was advised since I am single and have no dependents; I can collect social security at age 62. Does this sound like a decent concept?

Unfortunately, the response is not so straightforward as with most retirement decisions. If you intend to work beyond age 62, first there is an earnings restriction that lowers your Social Security income by $1 for every $2 you over the limit (the 2024 maximum is $22,320) until you reach your Full Retirement Age. Remember that the number of months you file before your FRA lowers your Social Security benefit. Should you file for benefits at age 62, your benefit will be discounted by thirty percent if your FRA is 67. File at 63; the reduction is 25%; at age 63 ½, it is just 22.5%. If your benefit at age 67 is $3,000/month, for instance, it would be lowered to $2,100 at age 62 and raised to $3,420 if you postpone claiming till age 70. This is a lifetime, permanent reduction. Remember that the end date will not alter depending on when you applied for benefits; it is a matter of getting a lesser payment for more years or a bigger payout for less years.

Delaying your Social Security to age 67 or beyond has one major advantage: annual cost of living adjustments will increase your payout for the rest of your life. Referred to as longevity risk, this offers significant defense against financial insecurity in your later years! Delaying applying for your benefits after age 70 has no incentive since the delayed credits stop accumulating at this age.

Whether you claim your benefit at 62 or later depends on your present need for this extra money, your future need to have income and other considerations including your health, inflation, as well as whether you are giving dependents financial security.

You might wish to view the Bipartisan Policy Center's following YouTube webinar:

Q. The break-even age for Social Security claiming baffles me. Please review that. I appreciate it!

Whether you filed at age 62, 67, or age 70—or whatever two ages you are comparing—the break-even age is the point in time when you will have obtained the same total cumulative income from Social Security. If you filed at age 67, for instance, you will get benefits for three more years than if you filed at age 70. Your benefit will be 24% more than the age 67 benefit yet if you start your benefit at age 70 you would have gotten 3 years of 8% per year delayed retirement credits. Therefore, even if registering at age 67 would have resulted in 3 more years of benefits, waiting until age 70 will yield a greater benefit that will catch up with the age 67 benefit about age 82. Stated differently, if you began at age 67 at age 82, your overall advantages would have been almost comparable to those if you had started at age 70.

Assume for the moment your benefit at age 67 is $2,500. For 15 years, by age 82 you would have gotten $2,500/month or $30,000/year for a total benefit of $450,000. Should you wait until you are 70, the monthly payout would rise to $3,100 or $37,200 annually. By the time you get benefits at age 82, you would have accrued $37,200 for 12 years or a total benefit of $446,400.

Other factors to take into account are annual cost-of-living adjustments as well as your intended working length and the requirement of this income Social Security offers. More crucial than determining how long you would need to live to "break-even" is when you will require Social Security's income. Remember that if you die early, you won't need the money anymore; yet, if you live a long life, you most likely want to avoid running out. While this choice is more flexible, it can be more difficult for a married couple determining whether to collect spousal benefit levels or earned benefits.

My husband and I both retired; I get a private sector pension while he has CSRS. Will he be eligible to Social Security benefits either spousally or widowly? Should I get my own Social Security retirement, will I be eligible for the CSRS survivor benefit?

Should he elect this at retirement, independent of your own private sector pension benefit or your eligibility to Social Security retirement benefits, you could be entitled to a survivor benefit from his CSRS retirement. Should you predecease him, the Government Pension Offset will cut his right to Social Security widows' and spousal benefits by 2/3 of his CSRS retirement. This will most likely erase his entitlement to any of the Social Security benefits you might have otherwise received for him.

With an act of Congress sponsored by the members and the advocacy section of the National Active and Retired Federal Employees Association, let's hope this onerous clause is removed. "These public servants dedicate their lives to keeping us safe, educating our children, and serving our communities, and they pay into Social Security just like everyone else," NARFE said in a recent Senate subcommittee hearing that Sen. Sherrod Brown, D-Ohio, who is the lead sponsor of S. 597 which along with H.R. 82 is aimed at restoring full Social Security benefits to nearly 3 million Americans, reported. Middle-class retirement security is mostly dependent on Social Security, hence everyone should be able to use it; people who serve our communities should not be punished for their service.