Many Americans truly have no idea how Social Security works besides the very basic information. While it certainly has been getting a lot of negative press lately, Social Security was actually designed to improve the financial well-being of all Americans and there are quite a few benefits that everyone should know. This blog aims to address that oversight. Enjoy.
Benefit 1) The more you wait, the more you get. If you are physically and financially able to wait until you are 70 years old to start receiving disbursements from Social Security, you will actually make about 76% more money than a person who starts taking their distributions at 62. The reason is that every year you don’t take your benefits after age 62, the Social Security Administration puts 8% more into your account.
Benefit 2) The more you work, the more you get. To qualify for Social Security benefits you need to work 10 years and receive 40 “credits”. The more years that you actually work and pay into Social Security, the more money you will get come retirement. Even better, if you work for 35 years the average amount of money you get back will be much higher than someone who works less than 35 years.
Benefit 3) Form 521. Let’s say that you decided to start taking Social Security benefits at age 62 but, after a year, realized that you had more than enough money without the benefits. In most cases you would think that, since you started, you can’t stop collecting benefits but you would be wrong. Form 521 will actually allow you to pay back any benefits that you’ve received and basically “un file” and start over. Once you do, the extra 8% per year that comes with not filing will start kicking in and, when you turn 70, you can re-file and get that extra cash.
Benefit 4) For married couples, only 1 person needs to take their benefits. What this means essentially is that instead of both a husband and wife taking their Social Security at the same time (and thus losing the benefits of leaving their Social Security intact until age 70) only one spouse can file to draw their benefits while the other waits.
Benefit 5) Getting Social Security benefits from your ex-spouse. If you’re divorced but were married for 10 years or longer, you’re actually entitled to 50% of the benefits that your former spouse will get from Social Security. Not only that but, if your spouse’s Social Security benefits are greater than yours, you can choose to take theirs instead. (We’d sure like to be a fly on the wall when these Social Security claims are filed.)
Benefit 6) Death benefits from your spouse. If you are 60 years old and have never remarried, you can apply to get up to 50% of your deceased spouse’s Social Security benefits. This not only allows you to get some extra money but also to let your own Social Security benefits grow until you reach the age of 70 and thus take advantage of the extra 8% per year that Social Security will give you. Even more, if you reach 70 and find that your spouse’s benefits are still higher than what you will get, you can continue receiving theirs.
As you can see there are quite a few different benefits that Social Security offers and we’re betting that you weren’t aware of most of them. If you are coming up on retirement some of the facts above may be quite important to you and, if you are physically and financially able to wait, might mean quite a bit more dollars in your pocket instead of Uncle Sam’s. If you have any questions about retirement planning or personal finances in general, please let us know and we’ll get back to you with information, advice and answers.