SHOW NOTES: 2018-02-01 Money in Motion

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Last Week’s Question of the Week: In 2016, what was the average tax refund in the United States? ANSWER: In 2016, the average tax refund was $3050 in the United States.

HOST: I know as we plan for retirement, the big question you hear all the time is probably “When should I collect Social Security?”

KLAAS FINANCIAL: Yes, we always come back to this topic because for many people planning for retirement, this will definitely be an important part of their future income, and for some perhaps their only income.

Social Security

  1. – wonderful resource for people regarding social security. Can set up a login to view your own account at any time.
  2. Everyone wants to know when they can or should take their benefit. So there is a difference from when you can first take it… to when it is actually your full retirement age. For anyone born between 1943-1954, your full retirement age is age 66, for those born between 1955 and 1959 your full retirement age is 66 plus some months. After 1960, it is age 67.
  3. Of course, you can choose to take your benefit as early as 62, but you need to remember that your benefit will be reduced.
  4. For example:
    • If you start receiving retirement benefits at: age 62, you will get 75% of the monthly benefit because you will be getting benefits for an additional 48 months. At age 65, you will get 93.3% of the monthly benefit because you will be getting benefits for an additional 12 months.
    • An interesting fact to note is that based on a study from 2013 (Center for Retirement Research at Boston College), at least 60% of retirees sign up for benefits before reaching their full retirement age.
    • When is the right time?
      • You will need to determine how much income your other investments and retirement accounts (IRAs, pensions, after tax accounts) may bring you on a yearly basis, and whether you have any part-time working income, and then you can figure out the best time for YOU to begin taking your social security benefit.

HOST: How will my social security benefit be determined?

KLAAS FINANCIAL: Excellent question.

  1. Social Security takes a look at your lifetime earnings, adjusting them for inflation, and then calculates your average indexed monthly earnings during the highest 35 years of employment to determine your benefit.
  2. You’re eligible for cost-of-living benefit increases starting with the year you become age 62. This is true even if you don’t get benefits until your full retirement age or even age 70. Cost-of-living increases to your benefit beginning with the year you reach 62, and up to the year you start receiving benefits.
  3. When you delay your retirement past your full retirement age, Social Security benefits are increased a certain percentage (depending on your date of birth) if you delay receiving benefits until after your full retirement age. DRC- Delayed Retirement Credits. Your benefit can increase up to 8% per year until you start taking benefits, or until you reach age 70. Therefore, almost NO reason to NOT pull once reach age 70.
  4. If you’re a government worker with a pension, a different formula is applied to your average indexed monthly earnings. To find out how the Windfall Elimination Provision (WEP) affects your benefits, go to and use the WEP online calculator.

HOST: How many credits do you need to qualify for to even get a Social Security Benefits?

KLAAS FINANCIAL: First of all, it is good to understand that you’re not automatically given Social Security as a U.S. citizen. In order to qualify, you have to earn 40 lifetime work credits, of which a maximum of four can be earned annually. In 2018, it now requires $1,320 in earned income per lifetime work credit, or $5,280 for the full year.

HOST: So what if I have not earned enough credits to collect a social security benefit?

KLAAS FINANCIAL: If you have not worked or do not have enough Social Security credits to qualify for your own Social Security benefits, you may be able to receive spouse’s benefits.

  1. To qualify for spouse’s benefits, you must be:
    1. At least 62 years of age; or
    2. Any age and caring for a child entitled to receive benefits on your spouse’s record who is younger than age 16 or disabled.
  2. If you start receiving benefits as a spouse at your full retirement age, you will get 50% of the monthly benefit your spouse would receive if their benefits started at full retirement age. Your benefit will be permanently reduced, if you start receiving benefits at…
    1. age 62, you will get 35% of the monthly benefit instead of 50% because you will be getting benefits for an additional 48 months.
    2. age 65, you will get 45.8% of the monthly benefit instead of 50% because you will be getting benefits for an additional 12 months
    3. If you do have enough credits to qualify for your own Social Security benefits and you apply for your own retirement benefits and for benefits as a spouse, YOUR benefits are paid first. If your benefits as a spouse are higher than your own retirement benefits, you will get a combination of benefits equaling the higher spouse benefit.

HOST: Isn’t there a limit to how much income you can earn when you are collecting Social Security?

KLAAS FINANCIAL: One aspect of Social Security is that if you enroll prior to your full retirement age and you’re still working, the SSA can withhold part, or all, of your benefits based on how much you earn per year.

In 2018, early filers who are under the full retirement age and have earned income over $17,040 a year ($1,420 a month) will have $1 in benefits withheld for every $2 in earned income over the limit.

For folks who claim Social Security during the year they’re set to reach full retirement age, but aren’t there yet. In 2018, $1 in benefits could be withheld for every $3 in earned income over $45,360 ($3,780 a month) if you haven’t yet reached full retirement age, but will do so late this year.

It’s also worth noting that if the SSA withholds your benefits and keeps you from double dipping between Social Security income and working wages, you don’t lose your benefits forever. Once you cross full retirement age, you’ll get them back in the form of a higher monthly payout.

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Catch C.J. Klaas and Maleeah Cuevas on Money in Motion every Thursday on Madison's 1310 WIBA from 8:05-8:35am.