As you near retirement, you must be thinking more and more about Social Security. Social Security benefits can end up being the bulk of your reliable income in retirement so you want to be able to maximize this income source. When it comes to actually claiming Social Security, it can be complex. Keep reading to learn what to know before claiming Social Security.
What is “Full Retirement Age”?
Full retirement age determines when you will be able to start claiming Social Security benefits and how much you will receive in benefits monthly. Below is information about how to determine your Social Security Full Retirement Age:
- For people born between 1943 and 1954, your full retirement age is 66.
- For people born between 1955 and 1959, your full retirement age is 67.
- For people born between 1960 or later, your full retirement age is 67.
While you can start getting Social Security benefits at age 62, your payments will be higher at your full retirement age.
How Do You Earn Social Security?
To make yourself eligible for Social Security benefits, you have to earn at least 40 credits throughout your career. Each year of working, you can earn up to 4 credits so it can take at least 10 years of work to qualify for Social Security benefits.
In 2022, you receive one credit for every $1,510 of earnings for up to 4 credits per year.
How Are Social Security Benefits Calculated?
The amount of your Social Security benefits is based on the 35 years of your highest income. If you have less than 35 years of income-earning, each year with no income will have a zero entered. You can increase your Social Security benefits by working into retirement to replace a zero or low-income year with a higher-income year.
The maximum amount you can receive in 2022 at full retirement age is $3,240 per month. In 2022 at age 70, your maximum monthly benefit is $4,194 if you delay claiming Social Security benefits.
Are There Cost Of Living Adjustments?
As inflation and cost of living increases, there are adjustments to Social Security benefits to account for that. This is one of the best aspects of Social Security benefits since your other retirement payouts do not adjust for inflation. Each year, the cost of living adjustment is based on the changes of the consumer price index.
For 2022, there is a 5.9% cost of living adjustment for Social Security benefits since inflation has risen exponentially this year.
Is There A Benefit Waiting To Claim Social Security Benefits?
While you can collect Social Security benefits starting at age 62, this can dramatically decrease your payments. By claiming prior to your full retirement age, the decrease in your payments can be up to 25% to 30%.
Waiting until full retirement age allows you to receive 100% of your earned benefits but you can get an even larger benefit by waiting until age 70. At age 70, your monthly Social Security benefit can grow up to 8% each year until then. Any cost of living adjustments are included as well so you won’t miss out.
It’s extremely important to understand your benefits before claiming Social Security. Contact me for help at (402) 454-7204 or email me at firstname.lastname@example.org