Are you getting ready to take the big plunge into your golden years and retire? Awesome! This is a huge step in life and you've probably looked forward to it for a very long time. Now that retirement is upon you, it's time to make sure all your hard works pays off the way it should. You probably have all your retirement accounts, pensions, investments, etc ready to go, but there are also a few things you need to do before you start to claim your Social Security benefits. Choosing when to start Social Security is a really important decision and will have long term impact. Make sure you check these six things off of your list BEFORE you elect to begin your benefit payments.
Checklist Tip #1: Find Out Your Benefit Credits
This is very important to look into...and if your work history was sporadic and you haven't looked at your statement in a while, this could be a BIG wake-up call. You need to have enough credits to be "Fully Insured" and collect benefits. For most people, you need 40 credits. There are some exceptions, and the Social Security Administration has published a guide to how credits work that can be found here: https://www.ssa.gov/pubs/EN-05-10072.pdf . Long story short, you just need to have worked for a certain amount of time and made enough money to earn Social Security for retirement.
Checklist Tip #2: Check Up On Your Spousal Benefits
Benefits can very greatly from person to person. You may be able to get Social Security spousal benefits if you were married for a certain number of years. This is true even if you are divorced from that spouse. So check in to the fact you may receive better benefits in your spouse or former spouse's Social Security benefit credits. If one spouse has a much higher earnings record than the other, spousal benefits could be a winning option.
Checklist Tip #3: Know The Application Is Online
Not only does Social Security have a robust website, you can also complete the Social Security benefits application online at ssa.gov . To make the deal even sweeter, it only takes about 15 minutes. How easy is that? Make sure you know what you're doing before you hit that submit button though. A wrong click could mean a costly mistake if you don't know what you're electing!
Checklist Tip #4: Consider Your "Full Retirement Age"
You can actually start to apply for Social Security benefits up to 3 months before you turn age 62. Something VERY important to note though is that everyone has what's called a "Full Retirement Age". This is the age at which you can claim your full Social Security benefits with no reduction or work penalties. Full retirement age used to be 65 but it has gradually risen to 67 for the baby boomer generation and those generations after. You can even delay Social Security Benefits past your full retirement age and get a HIGHER payout for life. After age 70 though, there are no more increases for delaying benefits.
Checklist Tip #5: Know That You Are Ready To Stop Work
This is an important one. Some people don't want to retire, and that's purely a personal lifestyle decision. For some people, retirement means cutting back or starting something new and not necessarily stopping work altogether. A HUGE point to note however is that continuing to work while simultaneously collecting Social Security can affect the amount dollar-wise you receive in benefits if you have not yet reached full retirement age. So it might not be worth it to keep that part-time job if it's only going to eat into your Social Security payments. For the year 2019, this limit on earned income is $17,640 ($1,470 per month) (source: https://www.ssa.gov/planners/retire/whileworking.html ). The amount goes up each year. If you are collecting Social Security retirement benefits before full retirement age, your benefits are reduced by $1 for every $2 you earn over the limit. VERY IMPORTANT!
Checklist Tip #6: Get The Budget In Check
Being on a fixed Social Security income is doable if you are able to plan and budget accordingly. It may mean downsizing your current living situation into something more financially manageable or paying off some debt before you are able to retire. Take the time to work our your costs of living, and don't forget to take inflation into account. On the flip side, if everything is looking good then this may be an opportunity to discuss family legacy and philanthropic desires!
The Social Security website ssa.gov is a wealth of information and the official place to go. If you still have questions the government site can't answer for you or if you need some personalized attention, Click Here to schedule your free consultation!
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About the author: Kyle A. Davis is a Chartered Financial Consultant® , Chartered Advisor in Philanthropy® , and president of Integrity Financial Group in Orlando, FL. He is a Florida native and an advocate for financial literacy and practical money education. When not assisting clients in planning for retirement, he creates educational videos on financial wellness on his YouTube Channel - https://www.youtube.com/user/financialplannerinfl
This content is developed from sources believed to be providing accurate information. The information in this material is not intended as investment, tax, or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.