While filing for Social Security benefits appears to be simple (and it is, as the application itself is), there are a few things that a worker should consider before opting to file for their first payment.
The first step is to determine whether you are eligible for benefits, as you must have worked for at least ten years with taxable wages and be at least 61 years and nine months old to file on your own record. Conditions for filing on someone else’s record may differ, but that is a topic for another article. So, here are some additional things you should know:
1. When to apply
The age at which you claim Social Security has a substantial impact on your monthly benefits. Most workers born after 1960 retire at the age of 67, although those born between 1943 and 1954 retire at the age of 66. Benefits can be collected as early as age 62, although this results in a reduction.
For the first 36 months of early claiming, benefits are lowered by 5/9 of 1% per month, and any subsequent months are decreased by 5/12 of 1%. Claiming at age 62 reduces benefits by 25% for a full retirement age of 66 and 30% for a full retirement age of 67.
For example, a $1,000 payment at full retirement age is reduced to $700 if claimed at age 62, while a spouse’s $500 benefit is cut to $350. Delaying benefits beyond the full retirement age boosts payments through delayed retirement credits (DRCs), which add 2/3 of 1% for each month of delay, up to 8% each year until age 70.
Claiming strategically will be the key to financial success in retirement.
2. How much you’ll get monthly from Social Security
Social Security benefits are difficult to estimate, which is why the Social Security Administration offers a benefit calculator on the my Social Security account.
The closer you get to full retirement age, the more accurate the software will be, because it works by predicting how much you will earn in the years remaining until you retire, but it should give you an overall idea of what to expect when you do decide to retire, or at least when it would be a good idea to retire.
3. What you need to apply online or in person
When dealing with bureaucracy, there are few things worse than scheduling an appointment and not having all of the necessary papers and having to restart the process. So the first step is to go over your records and obtain the relevant information from the IRS or former employers if you do not already have it. You’ll need:
- Basic information about yourself: Social Security number, Original birth certificate or proof of U.S. citizenship or resident alien status
- Your earnings history: Verification of your record of earnings
- Direct deposit for benefit payment: Routing and account number for your bank account
- Employer details for current year and prior 2 years: Employer name, start and end dates of employment
- Self-Employment Details for Current Year and Prior 2 Years: Business type, total net income
- Current and past marriage: Your spouse/former spouse’s Social Security number and birth date, Date you got married/divorced and where you got married (city, state, country)
- U.S. Military Service: Type of duty and branch and service period dates. Military service papers if you served before 1968
- Names of your children: Some children may be eligible for benefits based on your work history. Unmarried children under the age of 18 or disabled children under the age of 22 may qualify for some type of benefit based on your work history.
4. Social Security’s birthday rules
This may seem unusual, but the date you were born determines when you can collect Social Security payments since particular regulations apply to persons born on specific dates.
If you were born on the first day of a month between February and December, Social Security calculates your benefits and full retirement age as if your birthday had occurred the previous month.
For those born on January 1, Social Security counts December of the previous year as your birth month and year. Meanwhile, people born on February 29 during a leap year are unaffected because Social Security uses February as their birth month regardless of whether the date happens yearly.
