| Each day I receive more and more questions | | | | retirement benefits? |
| from my baby boomer clients who are confused | | | | If a spouse did not work they are still eligible for |
| about Social Security benefits and taxation. Social | | | | Social Security benefits equal to 50% of their |
| Security benefits come in three flavors: | | | | working spouse's PIA (full retirement amount). |
| Retirement benefits, survivor benefits and | | | | When the working spouse dies, the surviving, |
| disability benefits. The questions I receive primarily | | | | nonworking spouse, is entitled to 100% of their |
| involve questions regarding the retirement | | | | deceased working spouse's retirement benefits. |
| benefits area. With 365 baby boomers turning 62 | | | | Should I begin collecting benefits at age 62 (early |
| each hour, since January 1st 2008, I have no | | | | retirement)? |
| doubt that the frequency and diversity of these | | | | If you are hell-bent on early retirement and need |
| questions will grow. Fortunately, most of the | | | | the retirement benefits to survive, then the |
| questions are very similar and I will address, in this | | | | answer is an obvious yes. If you do not need the |
| article, the most common issues I am regularly | | | | benefits to survive and there is longevity in your |
| confronted with. | | | | family, then waiting until full retirement age is |
| When can I retire and collect benefits? | | | | probably the best option as your increased |
| You have three choices as to when you can | | | | benefits will begin paying off after age |
| begin collecting retirement benefits: | | | | seventy-six. |
| Age 62 or | | | | What if I retire early, collect retirement benefits |
| Normal Retirement Age or | | | | at age 62, and soon after realize I need to work |
| Later than Normal Retirement Age | | | | because I am not making ends meet? |
| Normal Retirement Age refers to the age you | | | | In this case the amount of earnings you make |
| need to be in order to receive your Primary | | | | during the year cannot exceed $14,160 (2009). If |
| Insurance Amount ("PIA"). PIA is the full, normal | | | | your earnings exceed this amount you will be |
| retirement benefit you are entitled to. When you | | | | required to pay back one dollar in Social Security |
| retire early (i.e. at age 62), your full retirement | | | | retirement benefits for every two dollars of |
| benefit is reduced to an amount equal to 75%. | | | | earnings that exceed this $14,160 (2009) amount. |
| This means if you retire at age 62 you will | | | | You can find yourself in a financial mess when this |
| receive 75% of what you would normally receive | | | | happens so you must consult your CPA if you are |
| if you waited until you hit your normal retirement | | | | thinking of returning to the workforce, even |
| age. If you retire later than your Normal | | | | part-time. |
| Retirement Age, your future retirement benefits | | | | I am divorced and I did not work much during my |
| grow by 8% per year until you reach age 70. | | | | life. Am I eligible for Social Security benefits? |
| After age 70 the Social Security Administration | | | | A divorced spouse who does not meet the forty |
| will not increase your benefit amount one red | | | | quarter minimum requirement and who was |
| penny. | | | | married for ten years to the same spouse, is |
| Normal retirement age varies according to your | | | | entitled to 50% of their ex-spouse's PIA (full |
| year of birth: | | | | retirement benefit) if they wait until their full |
| Born 1937 and earlier = 65 | | | | retirement age. If they want to collect at age 62, |
| Born in 1938 = 65 + 2 months | | | | then they are eligible for 37.5 % of their |
| Born in 1939 = 65 + 4 months | | | | ex-spouse's PIA (full retirement benefit). |
| Born in 1940 = 65 + 6 months | | | | When should I apply for retirement benefits? |
| Born in 1941 = 65 + 8 months | | | | The earliest you can apply for benefits is three |
| Born in 1942 = 65 + 10 months | | | | months prior to turning age 62. |
| Born in 1943 to 1954 = 66 | | | | I never worked but want to apply for early |
| Born in 1955 = 66 + 2 months | | | | retirement benefits (age 62) on my husband's |
| Born in 1956 = 66 + 4 months | | | | account. My husband says he is going to continue |
| Born in 1957 = 66 + 6 months | | | | working. Is this a problem? |
| Born in 1958 = 66 + 8 months | | | | Yes. Generally, a spouse cannot collect on their |
| Born in 1959 = 66 + 10 months | | | | spouse's account until their spouse begins |
| Born in 1960 and later = 67 | | | | collecting. There is an exception, however. The |
| How are my Social Security retirement benefits | | | | working spouse can "file and suspend" (apply for |
| determined? | | | | Social Security benefits and then immediately |
| The calculation of retirement benefits is based on | | | | apply to suspend collecting benefits). |
| earnings over a forty year period. The lowest | | | | I intend on applying for early retirement (age 62) |
| five years are dropped and the remaining earnings | | | | but I will work part-time. Do I have to pay Social |
| are averaged over this thirty-five year period. | | | | Security tax on my earnings? |
| Am I eligible to collect Social Security retirement | | | | Yes. Everyone who works, even those collecting |
| benefits? I did not work that much during my life. | | | | Social Security benefits, must pay Social Security |
| In order to qualify for Social Security retirement | | | | tax on their earnings. |
| benefits you need to have worked forty quarters | | | | How much of my Social Security benefits will be |
| and earned a specified minimum amount during | | | | taxed? |
| each quarter, in order for the quarter to qualify. A | | | | The maximum amount of your benefits subject |
| quarter is a three month period. | | | | to income tax is 85%. It may be lower, |
| My wife was a homemaker and has never | | | | depending on your Modified Adjusted Gross |
| worked. Is she eligible for any Social Security | | | | Income. |