Earlier this month, we had a fascinating webinar on the topic of Social Security. On January 28th, we delved deeper into Social Security with a webinar featuring Andy Hardwick, from the Social Security Administration.
We’ve already learned how Social Security works and about a few connected programs, such as disability and Medicare. Today we will talk about how to qualify, the age you’ll receive your payments, and how your pension affects your Social Security benefits.
How to Qualify for Social Security
You earn Social Security benefits by working throughout adulthood. For each $1470 you earn in a year, you earn one work credit, up to four credits yearly. To earn retirement benefits, you need at least 40 work credits. You could earn that amount by earning at least $1470 every year from 22 to 62 years old. More likely, you could earn it in ten years if you make at least $5880. Even a part-time job is sufficient!
If you have not worked, for instance if you are a stay-at-home parent, you could qualify through your spouse’s benefits if the marriage lasted at least ten years.
When to Retire
Sixty-five isn’t the magic age to retire anymore. Instead, you have options. If you start receiving benefits at 62, you only get 75% of your full benefits for the rest of your retirement. You also won’t be eligible for Medicare till 65, so you’ll have to pay for your own health insurance once you’re not employed.
Early retirement is a more expensive choice, but it may make sense if you have a large retirement fund. Some workers also find themselves taking an early retirement due to employment difficulties. But if you become disabled due to health problems before 66, applying for disability is a smarter choice than early retirement.
Your full retirement age, when you receive the full benefit payment, is 66 or 67, depending on when you were born. At this age, you’ll receive your full benefit and your spouse will receive 50% of your benefit. You’re also eligible for Medicare, so your expenses will be lower.
If you hold out till 70, you’ll do even better. You will receive 132% of the full benefit. But this has to be balanced against the difficulty of continuing to work that long. If you love your job and are in good health, it might be a great choice. It’s also an option for people who haven’t saved much for retirement and need a larger benefit.
How Will Your Pension Affect Social Security Benefits?
If you receive a pension from your employer, you can still collect social security benefits. A pension does not count as income when calculating your earnings to see if your Social Security payment will be reduced. It does count as income when you calculate your taxes.
In most cases, your pension will not reduce your Social Security Benefit. But a few people have their benefits reduced due to the Windfall Elimination Provision. This affects people who worked at jobs that didn’t deduct Social Security tax, such as jobs at state and local governments. The more years you spent without paying into the Social Security fund, the more your benefit will be reduced—but never by more than half the amount of your pension.
The Government Pension Offset does the same for spousal benefits. If you are due a pension for your own work and a Social Security payment as a spousal benefit, then your spousal benefit will be reduced by up to two thirds of the pension amount.
Both of these exceptions are becoming more rare, as government employers began deducting Social Security tax in 1984. Younger workers will receive both their pension and Social Security without a reduction.
Learn about these topics and more by watching the recording of the webinar on our YouTube channel. We’ll learn the “magic number” to choose your retirement age and how to get the most out of your benefits. Don’t miss it!