Dear Larry and Jerry, I have subscribed to Maximize my Social Security, and it has been helpful. However, I could not find answers to two questions, based on the following information:
A. I plan to retire at age 65 yr. 1 mo. (In just a few months from now). At that time, I will draw from an annuity investment.
B. I will try to wait as close to my full retirement age of 66 yr. 4 mo. to start taking Social Security; however, I am not sure if I will be able to wait over a year to apply for Social Security, for financial reasons.
Now my questions:
1. If I start to collect Social Security before my FRA, I know my payments won't change once I reach my FRA. However, I will receive other FRA "benefits," is that right? Such as not having a limit on earnings I make while receiving Social Security?
2. Is there any benefit to waiting to take my Social Security at my FRA if I am not working and so not contributing to Social Security?
3. What is the amount taxed on Social Security?
4. I read your information and that from the Social Security website about divorced spousal payments, but I am still unclear on this. I was married for over ten years. When I apply for Social Security, will Social Security Administration automatically look into my former spouses benefits to calculate if mine is higher than 50% of his? Or do I have to request that? What happens if I apply to see what my former spouses benefit would be at 50% if I am not at my FRA? Can I start to draw my own benefits before my FRA, then, at my FRA, request my divorced spousal benefits if his at 50% are more than mine? (I was born in 1956)
5. Basically, are there benefits to me waiting to apply for Social Security before my FRA--even if I retire from my profession a year before my FRA--other than the higher payments each month?
Thank you!
Hi,
I should explain that I only answer questions submitted to this forum. I don't have access to any customer data or software results, so I can't give you personalized answers. You may want to resubmit your question using an online contact form accessed by clicking the help button so that your questions can be answered by one of our experts with access to your customer information.
I can answer your first question affirmatively. If you start drawing your benefits prior to full retirement age (FRA) the resulting age reduction in your benefit rate is permanent. But, even if you do start drawing early, once you reach FRA you would no longer be subject to having benefits withheld due to Social Security's earnings test.
I would refer you to your software results for an answer to your second and fifth questions. If you wait until FRA to start drawing your benefits your monthly benefit rate would always be higher than it will be if you start drawing sooner. Also, waiting past FRA to start drawing your Social Security retirement benefits would further increase your permanent monthly benefit rate, since you can earn delayed retirement credits (DRC) from FRA until age 70. DRCs raise your monthly benefit rate by 2/3rds of 1% for each month that you don't collect benefits between FRA and age 70.
Anywhere from 0% to 85% of your Social Security benefits can be subject to income taxes depending on your total income (https://www.ssa.gov/benefits/retirement/planner/taxes.html). The tax rate also varies based on your income level.
You cannot start out drawing your own benefits and later switch to divorced spousal benefits. Since you were born after January 1 1954, whenever you apply for either your own benefits or for divorced spousal benefits you'll be deemed to be filing for both benefits. if you qualify for divorced spousal benefits and if you start drawing those benefits prior to FRA, your divorced spousal rate and your own rate would both be reduced.
For example, say Ray files for his Social Security retirement benefits at age 65. Ray's primary insurance amount (PIA), which is what he would get if he started drawing at FRA, is $800. However, Ray's retirement benefit rate is reduced for age to $728. Ray's ex-wife is drawing her benefits and her PIA is $2000. Ray would then qualify for an excess divorced spousal benefit which would be calculated by first subtracting his PIA from 50% of his ex-wife's PIA, which in Ray's case amounts to $200 (i.e. $2000/2 - $800). But, since Ray starts drawing at age 65 his excess spousal rate is reduced for age to $177. Ray would thus get a combined monthly amount of $905 (i.e. $728 + $177), as opposed to the unreduced monthly rate of $1000 (i.e. $800 + $200) that he would have received if he'd waited until FRA to start drawing.
One important thing to keep in mind is that divorced spousal benefits do not get any higher if you wait past FRA to start drawing them. So, if your own PIA is significantly less than 50% of your ex-spouse's PIA then you wouldn't want to wait past FRA to start drawing your benefits. You should be able to find out from Social Security whether or not your own PIA is more than 50% of your ex's PIA, and whether or not you will be eligible for divorced spousal benefits.
When you file for your benefits, if you do qualify for additional divorced spousal benefits then Social Security should contact you to solicit an application. However, it would probably be advisable to call them and find out if you might qualify for divorced spousal benefits in addition to your own benefits.
Best, Jerry
