Is it time to start receiving your Social Security benefits? Once a person reaches 62, they are eligible to start receiving their Social Security benefits. However, you are only eligible if you paid into Social Security. There are some people, like teachers, who may not have paid into Social Security and therefore, will not receive a benefit from Social Security.
Let’s talk about benefits
The word benefit is kind of confusing to some people. To me, a benefit is something extra that you are given by your employer, sometimes it’s free and sometimes the employer pays a portion. In actuality, you and your employer pay matching amounts into Social Security every paycheck. This is not a random amount, it is an amount set by the Federal government. If anyone tells you that your Social Security is something that the government controls and can take away from you, it’s not really true. You put money in there, not by choice, but by the requirement of the Federal government. It is yours to keep until you die and all eligible dependents die.
It is also up to you to decide when you will receive it, within Federal guidelines. Many people take it as soon as they reach 62, the first time you are able to start receiving your Social Security. A reason to take it at 62 could be because you really need that money now. Another reason could be that you haven’t worked in years and want the money to spend on something in particular or to use it as extra money to live on. Your health can also make a difference in your decision.
Waiting can be a good thing
For each year that you wait and continue working your monthly payment will increase. If you are 62 and still plan to work full-time it may be better for you to wait a while. By working longer, you may be able to add more money to your HSA if you employer has a plan. By waiting until you are 66 and some months, you will reach what Social Security refers to as full retirement age, The number of months is based on the year of your birth. If your birth is prior to 1955 you would not have extra months. Starting in 1955 they add extra months. If you were born in 1960 your full retirement will not be until age 67. I was born in 1956 and my full retirement date is 66 and 4 months. You can find out your FRD, by looking at your Social Security Statement which is issued each year by the Social Security Administration. The other important age for collecting benefits is age 70. Once you are 70 you are required to start taking your Social Security payments. For more details on the amount your payments will increase if you wait, look at your Social Security Statement.
Social Security Statement
Your Social Security Statement is available online at www.socialsecurity.gov/myaccount. You will have to set up a My Social Security account. If you haven’t done so, you can do it now, as long as you are over 18, have a Social Security number and a valid email address and U.S. mailing address. Once opened you can check on what you have earned so far. This is your opportunity to make sure there have been no mistakes and find out what your benefits will be at a particular age. If the full retirement date changes in the future, you would find it there also. You can also estimate your future payouts based on an estimated earnings amount.
Once you decide, when will payments arrive?
Let’s say that you decide to get your benefits at age 62 and your birthday is December 30. Typically Social Security is direct deposited into your bank account. If you do not have a bank account Social Security can issue you a card, similar to a credit card, and the money will be added to the card monthly. You can use this card to pay your bills or you can have it cashed out. This is similar to state unemployment or disability, at least in California. If you need help you can contact the Treasury Electronic Payment Solution Contact Center at 1-800-333-1795.
Now back to your birthday. You will have signed up ahead of time, which can be done online, by phone or at your local Social Security office. It is recommended that if you go to the SS office, you make an appointment ahead of time, to save waiting time. If you start your benefits in December, you will not receive payment until January. Payments are made the month following your birthday. The date of your birthday will indicate when you will have the payment deposited into your account. With a date of birth on the 1st-10th, you will receive your payment on the second Wednesday of January in our example. If the birth date is the 11th-20th the money will arrive on the third Wednesday of January. All dates after that will be paid on the fourth Wednesday of January.
Should you have taxes taken out?
Keep in mind that unless you request federal taxes to be taken out of this check, you will not have any taxes taken out. Depending on your income, this could cause you to owe taxes at the end of the year. Social Security requires you to fill out a Form W-4V (V for Voluntary) from the Internal Revenue Service if you desire taxes taken out of your payment. You are given several choices on this form including 7%, 10%, 12%, and 22%. If you later decide to stop federal withholdings you would also use this form. This form can be turned in to Social Security in person or mailed to your local office. You can find the form online at the Federal government forms website: https://www.irs.gov/forms-pubs-search?search=W4V
As I stated earlier you can continue working full-time or part-time after you start receiving your social security. Keep in mind that once you reach a level of income set by the Social Security Department, your benefits will be reduced. As of 2020, you will have $1 deducted for every $2 that you earn after $18,240. If you continue working, past your full retirement date, they will deduct $1 for every $3 you earn beyond $48,600. It is best to check with Social Security on this, as they will want to know what you are anticipating earning, in order to deduct any amount required. The deductions will be repaid back to you at a future date.
Is it time to start receiving your social security?
I can’t tell you when will be the best time to apply for your Social Security. Every person is different. It is never too early to start planning for your future. You can check with a financial planner, your tax preparer or Social Security to help you determine the best time for you. Be sure to keep Social Security updated with your current name and address. Do not be scammed to pay an outside party to change your address or name, because Social Security will do it for free.
I hope this encourages you to give Social Security some thought, as to how it fits into your retirement plan. Be sure to take into consideration that any future life changes could affect your plan. It would be wise to review your plan annually.
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