How Earnings Affect Social Security

How Earnings Affect Social Security 1

If you begin to receive Social Security retirement (or survivor's) benefits before you reach full retirement age, money you earn over a certain limit will reduce the amount of your Social Security benefit. In 2016, your benefit will be reduced by $1 for every $2 of earnings in excess of $15,720*

The chart below shows the effect of annual earnings of $10,000, $20,000, and $30,000 on a $12,000 annual Social Security benefit ($1,000 monthly) for someone who hasn't yet reached full retirement age.

Source:  Social Security Administration, 2015

*Special rules apply in both the year you reach full retirement age and the year you retire if you have not reached full retirement age. If you are interested in learning when is the best time to apply for Social Security Retirement Benefits please call us at 949-216-8459 to set up a complimentary appointment to review your situation.

Four Common Questions About Social Security 4

As you near retirement, it's likely you'll have many questions about Social Security. Here are a few of the most common questions and answers about Social Security benefits.

Will Social Security be around when you need it?

You've probably heard media reports about the worrisome financial condition of Social Security, but how heavily should you weigh this information when deciding when to begin receiving benefits? While it's very likely that some changes will be made to Social Security (e.g., payroll taxes may increase or benefits may be reduced by a certain percentage), there's no need to base your decision about when to apply for benefits on this information alone. Although no one knows for certain what will happen, if you're within a few years of retirement, it's probable that you'll receive the benefits you've been expecting all along. If you're still a long way from retirement, it may be wise to consider various scenarios when planning for Social Security income, but keep in mind that there's been no proposal to eliminate Social Security.

If you're divorced, can you receive Social Security retirement benefits based on your former spouse's earnings record?

You may be able to receive benefits based on an ex-spouse's earnings record if you were married at least 10 years, you're currently unmarried, and you're not entitled to a higher benefit based on your own earnings record. You can apply for a reduced spousal benefit as early as age 62 or wait until your full retirement age to receive an unreduced spousal benefit. If you've been divorced for more than two years, you can apply as soon as your ex-spouse becomes eligible for benefits, even if he or she hasn't started receiving them (assuming you're at least 62). However, if you've been divorced for less than two years, you must wait to apply for benefits based on your ex-spouse's earnings record until he or she starts receiving benefits.

If you delay receiving Social Security benefits, should you still sign up for Medicare at age 65?

Even if you plan on waiting until full retirement age or later to take your Social Security retirement benefits, make sure to sign up for Medicare. If you're 65 or older and aren't yet receiving Social Security benefits, you won't be automatically enrolled in Medicare Parts A and B.

You can sign up for Medicare when you first become eligible during your seven-month Initial Enrollment Period. This period begins three months before the month you turn 65, includes the month you turn 65, and ends three months after the month you turn 65.

The Social Security Administration recommends contacting them to sign up three months before you reach age 65, because signing up early helps you avoid a delay in coverage. For your Medicare coverage to begin during the month you turn 65, you must sign up during the first three months before the month you turn 65 (the day your coverage will start depends on your birthday). If you enroll later, the start date of your coverage will be delayed. If you don't enroll during your Initial Enrollment Period, you may pay a higher premium for Part B coverage later. Visit the Medicare website, to learn more or call the Social Security Administration at 800-772-1213.

Will a retirement pension affect your Social Security benefit?

If your pension is from a job where you paid Social Security taxes, then it won't affect your Social Security benefit. However, if your pension is from a job where you did not pay Social Security taxes (such as certain government jobs) two special provisions may apply.

The first provision, called the government pension offset (GPO), may apply if you're entitled to receive a government pension as well as Social Security spousal retirement or survivor's benefits based on your spouse's (or former spouse's) earnings. Under this provision, your spousal or survivor's benefit may be reduced by two-thirds of your government pension (some exceptions apply).

The windfall elimination provision (WEP) affects how your Social Security retirement or disability benefit is figured if you receive a pension from work not covered by Social Security. The formula used to figure your benefit is modified, resulting in a lower Social Security benefit.5

1 4 5 Broadridge Investor Communication Solutions, Inc. Copyright 2016.2 3 6  5 Newsletter  Insurance products and services are offered through Craig Colley | Coliday and is not affiliated with Gradient Securities, LLC. Some of these materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Craig Colley

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