Social Security is a vital program for retirees, but it’s filled with rules that can be confusing. Whether you’re planning to claim benefits this year or you’re already receiving them, understanding these key points will help you make the best decisions for your retirement.
One of the most well-known facts about Social Security is that to collect benefits, you need to work and pay into the system for a significant number of years. This is true, but there is another route you can take to collect benefits even if you haven’t worked long enough—spousal benefits.
If you’re married, you can start claiming spousal benefits as early as 62. However, if you choose to claim them before you reach your full retirement age, your monthly benefits will be lower, and this reduced amount will continue for the rest of your life.
If you wait until you reach full retirement age, it’s a good idea to claim your spousal benefits right away. Unlike benefits that you earn based on your own work history, spousal benefits don’t allow for delayed retirement credits.
Delayed credits, which apply to your own earnings, can increase your benefits if you delay your claim past your full retirement age. But since spousal benefits do not have this option, there’s no advantage to waiting beyond full retirement age. The maximum spousal benefit you can receive is 50% of what your spouse can get at their full retirement age.
Another important point is that if you’re divorced, you don’t have to wait for your ex-spouse to claim Social Security before you can get spousal benefits. In fact, you can claim Social Security based on your ex-spouse’s work history even if they haven’t applied for their benefits yet.
For those who claim Social Security early and later regret their decision, there is a chance to undo the filing, but this option comes with strict rules. You can only do this once in your lifetime. If you choose to withdraw your application, you must do so within a year of claiming your benefits, and you’ll need to repay all the money you’ve received. If you meet these requirements, you may be able to refile at a later date for higher monthly payments.
One of the advantages of reaching full retirement age is that you can earn unlimited income without it affecting your Social Security benefits. However, before reaching full retirement age, you must be careful about how much you earn. For 2024, the earnings limit is $23,400.
If you earn more than this amount, your benefits will be reduced by $1 for every $2 you earn over the limit. For those reaching full retirement age in 2025, the limit increases to $62,160, and if you earn more than this, your benefits will be reduced by $1 for every $3 earned above the limit.
Earning too much could potentially reduce your Social Security benefits to the point where they are nearly gone. So, it’s important to plan ahead and calculate what makes sense for your situation. Social Security has many rules, and the ones mentioned here are among the most complicated. If any of these situations apply to you, be sure you understand them thoroughly this year to avoid any surprises.
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