Category: Finance

Social Security: Ask Rusty About the Mystery of Spousal Benefits

Yes, the spousal benefit formula is complicated, especially when both of you are entitled to your own Social Security benefits. And there’s never a simple answer to whether it is a good idea for the lower earning spouse to start benefits first at age 62. For one thing, it depends upon whether they are still working, but it also depends upon health, life expectancy and need for the money early.

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Personal Finance: Ask Rusty: Should We Get Married or Just Live Together?

Your own Social Security benefit will not be affected in any way if you get married, unless your potential new bride is a very high earner and her Social Security entitlement at her full retirement age (which is 66 years and 8 months) is more than twice the full benefit amount you were entitled to at your full retirement age (even though you claimed your SS earlier). In that case, you would become eligible for a spousal benefit from your new wife after you are married for one year. 

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Ask Rusty: Do Joint Tax Filings Alter Social Security Earning Limits?

If you collect Social Security before you reach your full retirement age (FRA), your wife’s earnings from working will not be counted toward your personal earnings limit. The earnings test looks only at your personal earnings and, if you exceed the limit, Social Security will take back some of your benefits. But only your personal earnings — as reported on your W-2 or Self-Employment tax return — count.

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Ask Rusty: What Happens to my Social Security if I Die at Age 62?

Social Security FICA payroll taxes collected from current workers are used to pay all those who are currently receiving benefits. Any excess collected which is not paid out in benefits is deposited into a special Trust Fund and held in reserve for the future. My hope is that understanding this will dispel a far too widely held myth that the money you pay into the Social Security program from your paycheck is deposited into a personal account for you—it is not. Rather, that money is used to pay benefits to all those who are already collecting Social Security.

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Ask Rusty: Does Paying Social Security Payroll Tax Increase my Benefit?

Everyone who works and earns—even those who are collecting Social Security benefits—must pay the Social Security FICA payroll tax. But paying that payroll tax doesn’t entitle you to a benefit increase. The FICA tax you pay doesn’t get credited to a personal account for you; rather, it goes into the Social Security general fund to help pay benefits to all current beneficiaries.

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Ask Rusty: Spousal and Survivor Benefits

Since your husband is already receiving his Social Security retirement benefits, you are eligible to collect spousal benefits at any time after you reach age 62, even though you are collecting Social Security Disability benefits (you don’t have to wait until he’s 70); however, if you start those spousal benefits before you reach your full retirement age (FRA) they will be reduced.

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Ask Rusty: Should I Take Social Security at 62?

If you take your Social Security benefits when you’re 62, the monthly amount you receive will be 27.5% lower than you would get at your full retirement age of 66 1/2. But if your current health issues mean that you must stop working and lose income you rely upon to make ends meet, then taking your benefits at age 62 will give you some badly needed financial relief.

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