Last Week’s Question of the Week: According to U.S. Census Bureau data, what is the average retirement age in the United States? ANSWER: According to U.S. Census Bureau data the average retirement age in the United States is 63, with the average length of retirement being 18 years.
HOST: Your topic today applies to everyone thinking about retirement, deciding when is the right time to begin our social security?
KLAAS FINANCIAL: Yes, this is an important topic. Looking at when the right time will be for you to start this income is very important, because for many people social security will play a big part in their income.
First of all, some fun facts… many people don’t realize that Social Security has been around for 83 years! Also, when Social Security legislation was approved in 1935, the minimum monthly benefit was $10 and the maximum was $85.
Full Retirement Age (FRA) refers to the age at which a person may first become entitled to full or unreduced retirement benefits.
- If you were born before 1954, your FRA is 66 or younger.
- If you were born between 1955-59, FRA is 66 plus some months;
- If you were born after 1960+, then your FRA is 67.
If your full retirement age is 67 and you start retirement benefits at age 62, your monthly benefit amount is reduced by about 30 percent. The reduction for starting benefits at age…
- 63 is about 25 percent;
- 64 is about 20 percent;
- 65 is about 13.3 percent; and
- 66 is about 6.7 percent.
The “optimal age” for drawing SS benefits depends on other sources of income, spouse’s income, health, longevity, etc.
HOST: So how do I know what my Social Security benefit will look like? And how far ahead should I file for benefits?
KLAAS FINANCIAL:
Go to ssa.gov to set up your own personal Social Security Statement account. Check for accuracy of income reporting.
You should apply for retirement benefits three months before you want your payments to start. The easiest and most convenient way to apply for retirement benefits is by using the online application at ssa.gov.
Don’t forget to withhold taxes when you fill out this form!
Many people are curious to know what is the maximum Social Security retirement benefit payable day?
- This depends on the age you retire and how much you had in earnings over the course of your working life. Social Security is designed to replace about 38 percent of the average American’s pre-retirement income… not everything!
- Today, if you retire at the earliest age possible (age 62), your max benefit would be $2158;
at full retirement age the max would be $2687. Claiming at age 70 the maximum monthly benefit is $3,698, or $44,376 a year. - Average current benefit in the U.S. is around $1404, per month, or an annual income of $16,848.
HOST: So, if I want to continue working can I still draw social security benefits? If so, is there an income limit? Also, if I wait to take my social security, I heard that my benefit will grow pretty substantially?
KLAAS FINANCIAL: Yes, you can and there are limits.
In the year following your retirement, Social Security recipients who earn more than $17,040 in 2018, will have $1 withheld for every $2 earned above that limit.
In the year that you reach your full retirement age, can now earn up to $45,360. However, your Benefit is reduced by $1 for every $3 earned above this higher limit.
With regards to your benefit growing if you wait… Yes, you are referring to is DRC’s (Delayed Retirement Credits) which can greatly affect the growth of your SS benefit.
- DRCs are credited at 8%/year between your full retirement age (66 or 67) and 70 for those that were born after 1943. The benefit increase no longer applies when you reach age 70, even if you continue to delay taking benefits. 0% is the amount the benefit will grow.
- Something else to know it that Social Security does have Annual cost-of-living adjustments (COLAs), first initiated in 1972, are based on the Consumer Price Index for the July/August/September quarter of the previous year. In 2018, the COLA rose about 2 percent — the largest increase since 2012.
HOST: What about marriage and social security?
KLAAS FINANCIAL: Yes, so if you are married and you have no Social Security benefit coming for your own record?
You are entitled to all of your benefit or half of your spouse’s benefit, whichever is greater (be aware of age discounting). Married for at least a year. They would have their benefit and you collect ½ of theirs.
What about if you are divorced? If your marriage lasted at least 10 years, you may be able to get benefits on your former spouse’s record.
What happens when one person in a couple passes in terms of our SS benefits income? Upon your death, no benefit from SS will continue to your family (similar to a pension); widows benefits can begin as early as age 60.
Visit www.ssa.gov to establish a login and get information about Social Security.
Catch C.J. Klaas and Maleeah Cuevas on Money in Motion every Thursday on Madison's 1310 WIBA from 8:05-8:35am.
