10 FAQs about Social Security (And Answers) for 2016
Managing your Social Security benefit is an important part of your retirement income planning process.This blog will answer some of the most important questions boomers approaching retirement need to know regarding their Social Security benefits.
10 Frequently Asked Questions about Social Security:
1) What are the requirements to qualify for social security retirement benefits.
- Be age 62 or older and (1)
- Have earned 40 Social Security “credits” or about 10 years of work over the course of your career. (2)
2) How do I earn Social Security credits?
- By working at a job where you pay Social Security taxes or earning money from self-employment. (3)
- For 2016, you receive one credit for each $1,260 of covered income during the year. This figure is adjusted each year for inflation. You can earn a maximum amount of 4 credits in a year. (4)
3) When do I reach “full retirement age”? (5)
- Born in 1942 or earlier – age 65.
- Born between 1943-1959 – Age 66.
- Born in 1960 or later – age 67.
4) If I file for Social Security Benefits before my “full retirement age (FRA)” will my benefit be reduced?
- Yes, if your “FRA” is age 66 and you file at age 62 your benefits will be reduced by 25%. If you file at age 63, your benefits will be reduced by 20%. If you file at age 64 your benefit will be reduced by 13.33%. If you file at age 65 your benefit will be reduced by 6.66%. (6)
5) If I file for Social Security Benefits after my “FRA” will my benefit be increased?
- Yes, if you file at age 67 your benefit will be increased by 8%. If you file at age 68 your benefit will be increased by 16%. If you file at age 69 your benefits will be increased by 24%. If you file at age 70 your benefits will be increased by 32%. (7)
6) If I delay filing for Social Security Benefits what is the break-even point?
- If you live past 80.5 years you will be better off claiming benefits at age 70 instead of claiming as early as possible at age 62. If your “FRA” is age 66, and you chose to delay claiming for benefits until age 70, your break even point would be approximately age 83.(8)
7) If my spouse has limited work history how is his/her benefit calculated?
- A spouse who has a limited work history may have a low benefit amount. That spouse can claim spousal benefits and then receive half of the other spouse’s benefit amount. (9)
8) Are Social Security benefits adjusted for inflation?
- Yes, Social Security benefits are adjusted for inflation. 2016 is only the third time in 40 years, Social Security recipients won’t be getting a bump in their monthly benefits.The amount of increase for the following year is announced every October. Cost of living adjustments are based on increases in the CPI: In 2016, the COLA is 0.0%. (10)
9) Will my Social Security benefits be reduced if I continue working?
- Your Social Security benefits will be reduced until one reaches their “FRA”. For years between age 62 and your “FRA”, the threshold is $15,720. For every $2 earned over $15,720, $1 is withheld from benefits. If you work into retirement in the year of your full retirement age up to your birthday, there is a $1 reduction for every $3 you earn above $41,880 in 2016. After you reach your “FRA”, your benefits will not be reduced no matter how much you earn. (11)
10) If I receive a pension will my Social Security benefits be reduced?
- A pension will not affect Social Security benefits if it is from work where one paid Social Security taxes. Any Pension from work where the individual did not pay Social Security taxes could reduce benefits. (12)
(1 & 2) Social Security Administration, Benefits Planner: Social Security Credits
(3 & 4) Social Security Administration, 2016 Social Security Changes, Fact Sheet
(5 & 6) Social Security Administration, Retirement Planner: Benefits By Year Of Birth
(7 & 8) Social Security Administration, Delayed Retirement Credits
(9) Social Security Administration, Retirement Planner: Benefits For Your Spouse
(10) US News & World Report, What No Social Security COLA Could Could Mean For You, Oct.22,2015
(11) Social Security Administration, 2016 Social Security Changes, Fact Sheet
(12) Social Security Administration, Retirement Planner: Factors That May Affect Your Benefits