New Rules You Need to Know About Social Security

6.6.16Rules on claiming benefits were never simple and recent changes have eliminated "file and suspend" techniques. Here's what you need to know about Social Security benefits right now.

Social security was originally designed to serve the elderly and destitute, but today, working Americans depend on Social Security benefits to fund part—and often all—of their retirement expenses. Kiplinger's "10 Things You Must Know About Social Security" explains the new rules about Social Security.

Here are some of the essentials you need to know.

Check your Age. Your age when you start to collect Social Security has significant consequences on the amount of money you'll ultimately get from the program. You need to know your full retirement age. You can collect Social Security as soon as you turn 62, but taking benefits before full retirement age results in a permanent reduction. It could be up to 25% of your benefit if your full retirement age is 66.

Check your Math. In order to be eligible for Social Security benefits, you must first earn 40 "credits." You can earn up to four credits a year. Thus, it takes 10 years of work to qualify for Social Security. This year you must earn $1,260 to get one Social Security work credit and $5,040 to get the maximum four credits. Your benefit is based on the 35 years in which you earned the most money. If you have fewer than 35 years of earnings, each year with no earnings is entered as zero, but you can increase your benefit by swapping out those zero years. You can work longer, even if it's only part-time. But a low-earning year won't replace a higher-earning year. The benefit isn't based on 35 consecutive years of work, but the highest-earning 35 years. There's a maximum benefit amount you can receive which is based on the age at which you retire.

Extra Points for Being a Spouse. One spouse can take a spousal benefit, which is worth up to 50% of the other spouse's benefit. But the calculation changes if benefits are claimed before full retirement age, and you can't apply for a spousal benefit until your spouse has applied for his or her own benefit. In addition, if your spouse dies before you, you can take a survivor benefit. If you're at full retirement age, it's worth 100% of what your spouse was receiving at the time of his or her death (or 100% of what your spouse would have been eligible to receive if he or she hadn't yet taken benefits). A widow or widower can begin taking a survivor benefit at age 60, but it'll be reduced because it's taken before full retirement age. And if you remarry before age 60, you can't get a survivor benefit. After age 60, you may be eligible based on your former spouse's earnings record. Eligible children can also receive a survivor benefit that's worth up to 75% of the deceased's benefit.

Why It Pays to Delay. Experts advise waiting to take benefits after reaching your full retirement age if at all possible. The increase in your benefits is significant: by 8% a year until age 70. We don't know too many investment vehicles that will give you this kind of return! Even working an extra year after full retirement age will make a difference.

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Reference: Kiplinger (May 2016) "10 Things You Must Know About Social Security"

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