On January 31, 1940, Ida May Fuller (pictured above) of Vermont became the first person to receive a monthly social security benefit. After about three years of paying payroll taxes, she had contributed a total of $24.75 into the Social Security program. During the next 35 years of her retirement, Ida May collected a total of $22,888.92 in Social Security benefits. Not a bad return on investment!
Between 1946 and 1964, approximately 78 million baby boomers were born in the United States. About 10,000 boomers qualify for Social Security benefits every day or over 400 per hour. Born on January 1st, 1946, just one second after midnight in Philadelphia, Kathleen Casey-Kirschling is recognized as America’s first baby boomer. In 2008 she elected to start receiving her Social Security benefits early.
According to the Social Security Administration, 74% of the 35.6 million retired individuals receiving social security benefits are receiving reduced amounts*. Here are seven things to consider when deciding to apply for Social Security benefits.
1. Do you know your full retirement age?
Your full retirment age can be as early as 65 or as late as 67 depending on your year of birth. If you elect to collect Social Security benefits prior to your full retirment age, you may be locked into a reduced benefit for the rest of your life.
2. Do You Believe You Can Turn Your Benefit Off and On?
You cannot simply turn on and turn off your benefits at will. You are allowed repay all benefits received within the first 12 months of filing and your benefits will continue on as though you had never claimed.
3. Do You Understand the Earnings Limit?
If you are at full retirement age or older, you can receive your full benefit without any restrictions on earnings. During 2013, if you are younger than your full retirment age, $1 of your benefits will be deducted for each $2 you earn over $15,120. Also, if you will reach full retirement age during 2013, $1 of your benefits will be deducted for each $3 you earn over $40,080 until the month you reach your full retirement age.
4. Taxes?
Yes, Social Security benefits may be taxable. In fact, up to 85% of your social security benefits may be taxed. It is important to understand the potential tax implications of your withdrawal plan during retirement before applying for your social security benefit.
5. Do You Understand How Spousal Benefits Work?
There are multiple strategies for married couples to employ to attempt to maximize their Social Security benefit. By exploring all of your options, you may gain thousands of dollars towards your retirement.
6. Divorced? You may be entitled to benefits based on your ex!
Were you married for 10 years or more to your ex? If so, you may be able to claim spousal benefits based on your ex’s earnings history. This will not impact your ex-spouse’s personal benefit.
7. Do You Know How Your Choices Will Impact Your Survivors Benefit?
Why do you want to maximize the benefit of the historically higher earning spouse? The higher benefit will continue with the surviving spouse for the remainder of their life. If the higher earning spouse claims early, this will impact the future income of the surviving spouse.
*Social Security Annual Statistical Supplement, 2012 (released February 2013)
