Some Things You Need to Know About Social Security.... | Tax Tip of the Week | No. 137

Social Security Choices

Are you or someone you know, getting close to drawing Social Security?  Do you think the only choices available are whether to start drawing at age 62, full retirement age (FRA), or later? You may have more options than you think… and those choices may not be presented to you unless you ask. Calculations are made based on your FRA and then reductions or credits are applied. Begin at age 62 or before FRA: The calculation is based on your own benefits records with a reduction for each month younger than FRA.  (Click here to determine your FRA.) These reductions are permanent and benefits can be reduced or eliminated if your earned income exceeds the limit set for that year, and is adjusted for the year in which you reach FRA.  For 2012 the limit is $14,640.  A widow(er) can start drawing at age 60, or age 50 if disabled, or any age if you have a child-in-care (under 16 or disabled adult child of the worker).  Income limits apply to these categories also. Start at FRA: The benefit can be calculated on your own records, or based on a current or ex-spouse’s (if not currently married) benefit at their FRA.  You’ll receive the higher of the benefits, not both. If collecting on spouse’s records, you will have to wait to collect until that person files, even if they don’t start collecting, unless they are deceased.  The benefits are 50% if spouse/ex-spouse is alive and 100% for a widow (er). You must have been married for at least 9 months for a widow(er) and 10 years for a divorced spouse.  If the spouse has delayed retirement credits, those credits are passed on. After FRA: For each month after you reach FRA up to the month prior to turning age 70, delayed retirement credits can be added to your monthly benefit amount.  The rate is currently 8% per year and passes on to spouse for their benefits.  The credits stop accruing after the death of the owner. Other options:  Claim & Suspend- file for your benefits at FRA but suspend receiving them. This starts your Medicare Part A.  At any point you can start your benefits and receive them back to the filing date, even if more than 6 months.  No delayed credits are received for your benefits under this method if you go back to original filing dates. Restricted Application- to maximize social security and survivor benefits for a married couple with comparable incomes, where one spouse wants to retire and the other wants to continue working past FRA. The retiring spouse files and claims their benefit, enabling the working spouse to collect a spousal benefit.  The working spouse continues to earn delayed retirement credits up to age 70, where they claim their increased benefits. Other benefits:  Other benefits may be available including widow(er), surviving spouse or child, and lump sum death benefits. Before you sign up for your benefits make sure you have checked out all of your options.  Your choice can mean $100,000’s of dollars difference in your pocket for your lifetime. No one knows what the future holds for Social Security recipients----but these are the rules for now.  Please give us a call if you have any questions or would like guidance on your benefits. This week’s author-Linda Johannes, CPA 

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