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How much do you know about Social Security

How much do you know about Social Security? Are you able to answer the questions that your clients are asking? This top 10 list will help.

If you understand my "Top How much do you know about Social SecurityTen" list relating to Social Security then you will know more than 90% of all professional advisors:

1) SSB benefits are calculated using the highest 35 yeaHow much do you know about Social Securityrs of indexed earnings/wages. Zero earning years count in the calculation. Benefits are not computed based on the highest 3, 5, 7 or ten highest years or the best “20” quarters. 35 years of earnings are taken into account. Wages/earnings are indexed for inflation through the age of 59.

2) Earliest age to begin receiving retirement benefits is 62. Recipients must be 62 for the whole month. You are considered to have obtained your birthday on the day before your actual birthday. Thus, if you are born April 2nd then you will be considered 62 for the whole month. I was born on February 13th so I will have to wait until March (when I turn 62) to begin collecting benefits.

3) Full Retirement Age (FRA) for people born between 1943-1954 is 66. FRA is gradually increasing to age 67.

4) Benefits grow by 8% annually after FRA. This is considered delayed retirement credit. Maximum increase is a whopping 32% between ages 66-70. Please do not ignore the delayed retirement credits as many times a surviving spouse may step into the shoes of a deceased spouse. It might be advantageous for the deceased spouse to have begun collecting benefits as late as possible to maximize benefits for a surviving spouse.

5) Spousal benefit is 50% of the higher earning spouse FRA SS benefit. If lower earning spouse’s benefit (wife) on own work record is less than 50% of husband’s benefit then the wife’s SS benefit will be comprised of 2 parts – 1) SSB based on her work record (reduced for early retirement) and 2) part of spousal benefit. The total will equal 50% of husband’s benefit at FRA. Confused yet?

6) The surviving spouse benefit is 100% of the deceased spouse FRA benefit or the amount the deceased spouse was receiving at time of death. Surviving spouse can begin to collect the surviving spouse benefit at age 60. Benefits will be reduced by 29.5% if begun at age 60. Please do not forget about young children. Children under the age of 18 (or 19 if in high school) may be eligible for benefits upon the death of a parent. Additionally, if the surviving spouse is taking care of a child under the age of 16, then the surviving spouse may collect benefits at any age as long as the child is under age 16.

7) There is an earnings limitation if you begin to collect SSB prior to FRA. If under FRA, the maximum annual earnings you can earn is $14,160. The recipient’s SSB will be reduced $1 for every $2 earned over the amount. The maximum earnings in the year that the recipient turns FRA is $37,680 and the SSA will withheld $1 for every $3 earned over this amount. There is no earnings limitation beginning the month you reach FRA. Thus, a recipient can earn $1,000,000 the month that FRA is achieved without sacrificing any SSB.

8) A single person should consider the “claim and suspend” strategy. Under this strategy the individual will file an application for SSB at FRA but will tell the SSA not to send a check. Benefits will grow 8% annually (delayed retirement credits) until benefits are officially started. The individual will have a safety net. If he/she encounters financial difficulties, he/she can request that the SSA send all accumulative payments that have been withheld and to begin monthly benefits. The recipient will not receive any interest nor will benefits be increased for the delayed retirement credits but the recipient will have access to a sizable amount of funds. The “claim and suspend” strategy has no negatives and should be considered by all single filers. You will be a hero by recommending that your single clients consider this strategy.

9) For married couples strategies such as “claim and suspend” and filing a “restrictive application” should be considered. These strategies are not based on age. The SSA is not prepared to discuss these strategies. There are a lot of additional benefits hidden in these strategies.

10) Our research has shown that the difference between the highest and lowest options can reach $10,000 per year. Do not let your clients file for Social Security benefits without consulting an expert. Professional advisors must understand that options exist and insist that their clients explore their options before filing for benefits. The folks at the local SS offices are just “order takers”. Recipients must develop a plan before going down to the local office to apply. Please make sure that your clients understand that SS may be a joint lifetime benefit and that their decision regarding SS must be taken very seriously.