Believe it or not, there are some good reasons to file for early Social Security benefits. But those only apply in some circumstances — and more often than not, people’s reasons to file early can be downright stupid.
That sounds harsh, but this about it: we’re talking about maxing out your available retirement income so you can make the most of this stage of your life. You don’t want to make a mistake here, especially a silly one you could have easily avoided.
Still, even when I give people the information they need to know about filing appropriately for their specific situation, some people just don’t get it.
Fact or fiction: Filing for Social Security at 62 is always a bad idea.
Most of the information and “advice” you find online makes the case that delaying your filing is always the right thing to do. There’s good reason for that: filing for Social Security at 62 means taking reduced benefits.
But it’s not true that filing at 62 is always a bad idea. This decision is highly dependent on your own personal set of factors.
You may hear people say things like, “you should always wait until you’re full retirement age for file for maximum amount of benefits.” Filing later for Social Security benefits does mean maximizing income in most cases — but that doesn’t apply to every situation.
In fact, there are five specific circumstances when I think filing early makes the most sense. Here they are.
If you’ve happened across some of the headlines about the future of Social Security, you may be thinking we should really be talking about the lack of a future for these benefits.
Follow the news around this topic for any amount of time, and you’ll be hit with some alarming claims. Here’s just a quick sampling:
“The entire Social Security program will be fully depleted…in 2034.”
“There’s a 0% chance that the government will be able to honor its existing commitments.”
If these warnings have you doubting the availability of Social Security funds to supplement your retirement income, you’re not alone.
A 2016 Transamerica study found 77% of employees felt the same way. American workers reported feeling worried there would be no money left by the time they could leave the workforce and draw their benefits.
But here’s the thing: these concerns may be unfounded. Is there a legitimate reason to feel alarmed? Are the headlines overdramatic, or do they serve as legitimate warnings?
To answer these questions, you need to understand the history of the Social Security Administration and its benefit program. From there, you can make a more informed, educated prediction for what the future of Social Security will look like — and more importantly, how you can plan for that future.
“What’s the best age to file for Social Security?”
This is the number-one question people ask me about Social Security.
And it’s little wonder because the answer is anything but simple or straightforward. In fact, finding the right answer for you often requires a lot of complex thinking and calculating to determine exactly what you should do.
Even if you can manage to do the proper planning on your own, then you’re left with an almost-bigger challenge: feeling confident that you got to the right answer.
You can do the hard work of making your best estimate… only to spend a lot of time and energy worrying and second-guessing yourself.
“What’s the best age to file for Social Security?” is the question that trips up most people more than any other in planning for the retirement you want. So let’s get to the bottom of this, and to an answer you can use, together.
It’s just one little blue, fragile piece of paper — but a lost Social Security card can add up to a lot of trouble. If you your card is missing, you need to act now.
Your card lists out both your full name and Social Security number, and with these two pieces of information a thief can easily wreak havoc on your finances.
A lost Social Security card is all someone needs to open accounts, file fraudulent tax returns, get healthcare under your name, and a whole lot more. Needless to say, you should keep your card in a safe place (in other words, not your wallet) to prevent accidental loss or theft.
But we all know things happen, even with the best safeguards in place. If your card does go missing, here’s what you need to do.
Understanding Medicare is an important part of your overall retirement planning, but it’s so confusing and complicated! But I’m here to help you understand Medicare and how it will impact your retirement plans. There’s a lot of information here, so grab a cup of coffee and get comfortable.
What Is Medicare?
Medicare is the government-run health program for older or disabled individuals. There are several parts to Medicare, and each part covers different things. The four main parts are:
Do you know how much in benefits your family is entitled to if you become disabled, die or retire? There are different rules for each type of benefit. Check out this video for an easy to understand description of who gets what and how much.
Did you know that there are Social Security benefits available to your eligible family members if you die, become disabled, or retire? There are some limitations though. Generally speaking, no more than 150% – 175% of your full retirement age benefit can be paid out.
Check out this video for more information.
This video walks you through the individual steps to calculate your Social Security family benefit maximum. The numbers in the formula change on an annual basis so please note that this video is made with 2018 numbers. You can find the formula for the current family benefit maximum calculation at this link.
Here are the most important Social Security changes for 2018. This is not all that’s changing, just what I think is most important.
Maximum Taxable Earnings
6.2% of your paycheck goes to Social Security tax (unless you’re self employed and then it’s 12.4%). However, there is a maximum amount of income that you pay this tax on. In 2017 this cap was $127,200. In 2018 the cap increases to $128,400.
Quarter of Coverage
Most of the Social Security programs require 40 ‘credits’ to qualify for benefits. So what does it take to get a ‘credit?’ It changes every year but for 2018 it will be $1,320. This is up from the $1,300 in 2017.
The amount you can earn before the SSA starts to withhold your benefits has increased from $16,920 to $17,040. Keep in mind that this only applies to benefits paid prior to full retirement age.
Cost of Living Adjustment
In most years the Social Security Administration increases benefits to keep up with inflation. It doesn’t always happen though. In fact, in the past 10 years there have been 3 years with a 0% increase. However, in 2018 benefits will increase by 2%.
The effective reduction to your Social Security benefits from the Windfall Elimination Provision changes based on your filing age. This is despite the well publicized ‘Maximum WEP penalty of $448 (for 2018).’
Check out this video where we walk step by step through the calculation process.
Summary of video:
In this video we discuss how the WEP penalty is subtracted from your benefit amount before reductions or increases for your filing age. This changes the effective penalty to an amount that is larger, or smaller, than the well-published $448 (for 2018). Simply put, the effective penalty is the amount of reduction or increase that an individual who is subject to the WEP would receive vs. an individual who is not subject to the WEP.