Social Security Benefits for 2010
First, the basics
Currently, those people born between 1945 and 1954 can receive full Social Security retirement benefits at age 66. The full retirement age increases each year by two months for those born from 1955 to 1959 until it reaches age 67 for those born in 1960 and beyond.
You may start collecting benefits at age 62, though at a reduced rate. The reduced benefit is now 75 percent of full benefits for those eligible for full retirement at age 66. It will be 70 percent of full benefits when the full retirement age is 67.
Delaying the collection of benefits until age 70 will increase the maximum benefit at full retirement age by 8 percent per year from age 66 to age 70.
Now, the strategies
No one has ever received guaranteed 8 percent earnings on invested money. If you use your IRA income or after tax- money to live on rather than applying for Social Security at age 66, you will receive an increase in your monthly Social Security benefit of 8 percent per year to age 70. There’s no additional benefit if you wait past 70.
A spouse who had little or no employment may receive half of the other’s benefits when the working spouse applies for Social Security. Thus, a married couple in a one wage-earner family receives 150 percent of the working spouse’s benefit.
A worker who begins collecting Social Security benefits at age 62 and then accepts a job offer a year or two later is allowed to pay back all the funds without interest and withdraw the application for benefits. The worker will be deemed to have never applied for benefits and can re-apply at a later age to receive a larger benefit. The age range for this “stop and payback” is 62 – 70.
The Baby Boom generation has a 50 percent divorce rate. If you were married for 10 years before divorcing, you are eligible to receive spousal Social Security benefits beginning at 62 even if your ex-spouse has not requested that benefits begin. If you re-marry before you are 60, this benefit disappears.
Be aware
Certain thresholds will cause your Social Security benefit to be taxable for federal tax purposes. If your adjusted gross income plus interest on tax-exempt bonds plus 50 percent of your Social Security benefit exceeds $25,000 if single or $32,000 if married and filing jointly, 50 percent of the excess value is taxable up to $34,000 if single or $44,000 if married and filing jointly. After that 85 percent of the excess value is taxable. Total taxable Social Security can be 85 percent of the total Social Security benefit you receive.
Be mindful
Where you retire affects your benefits. Some states tax Social Security benefits. The following states currently collect taxes on benefits: Colorado, Connecticut, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont and West Virginia. Iowa and Missouri are phasing out their tax.
Do more research
You may want to consult with a CPA/PFS (Personal Financial Specialist) to review your retirement plan and determine how Social Security benefits fit. Call us today to schedule your appointment 304-263-0891.
