You Can Undo A Social Security Benefits Claiming Decision
There arent many times in life you can take a mulligan. But Social Security offers you the chance for a do-over. Lets say you claimed your benefit, but now regret the decision and wish you had waited. During the first 12 months of claiming benefits, you can withdraw your application. You will have to repay all of the benefits youve received, along with any spousal benefits, but when you restart benefits, youll receive a larger amount, just as you would have if you had delayed filing in the first place.
If it has been more than 12 months since you filed for Social Security, you cant withdraw your application and restart benefits at a later date. But early retirees who have returned to the workforce are not totally out of luck: Once you reach full retirement age, you can suspend benefits until age 70. This will enable you to earn delayed-retirement credits of 8% a year . This can add up to tens of thousands of dollars for many people, says William Meyer, chief executive of Social Security Solutions.
Why You Need To Supplement Your Social Security Benefits
First off, Social Security was intended to be a supplement to people’s retirement savings. The National Institute on Retirement Security describes retirement income as a ‘three-legged stool’, consisting of Social Security, a pension plan, and individual retirement savings through accounts like a 401 or an individual retirement account.
However, since the 1980s, fewer and fewer companies have been offering pension plans to their employees. The onus for saving for retirement has fallen on the employee.
And most people aren’t doing great when it comes to saving for the future: A 2020 NIRS study found that 40% of Americans rely on Social Security as their sole source of retirement income. The average annual Social Security benefit for a worker is nearly $20,000, hardly enough money for most retirees to subsist on.
When it comes to saving for retirement, it’s important to start as early as you can, whether that’s through an employer-sponsored 401 or a traditional or Roth IRA. By saving for retirement early in life, you’ll reap the benefits of compound interest, which is interest earned on interest.
For example, if you started saving for retirement when you’re 25 and had investments yielding a more conservative 6% return, you would need to invest $530 per month for 40 years to reach $1 million. If you waited until you were 40 and had investments yielding a 6% return, you would need to invest $1,500 per month for 25 years to end up with $1 million.
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So, the first rule is pretty cut and dried. Some may wonder why checks are sent one month late. In a nutshell, the law says you must meet all the eligibility requirements for an entire month in order to get a Social Security check for that month. In other words, the government must wait until the month is over with before it knows for sure that you are due benefits for that month.
One other point about this rule: When the Social Security retirement application asks you which month you want your benefits to start, dont worry about the month you will actually be paid. Just put down the eligibility month. For example, if you want benefits to start at age 65, and you are 65 in May 2021, indicate May as your starting month not June, even though that is when you will actually be paid.
The second rule takes a little more explanation. For decades, all Social Security benefits were paid on the third of each month. But as the number of Social Security beneficiaries grew, Social Security officials noted that this once-a-month payment schedule was putting a huge workload on their field offices and call centers at the beginning of each month. So, they decided to stagger Social Security payment dates on each of three Wednesdays throughout the month.
If you were born on the first through 10th of the month, you will get your Social Security check on the second Wednesday of each month.
Tom Margenau
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Coordinate With Your Spouse
Finally, if you’re , coordinating with your spouse can deliver bigger benefits, too.
Imagine this scenario: You’re married, and your spouse has generally earned much more than you. You both start collecting benefits as soon as you can, at age 62. You collect, say, $1,800 per month, and your spouse collects, say, $2,300. If your spouse dies first, your household can no longer collect both checks instead, you get the greater of the two, so your benefit rises to $2,300.
But if your spouse had been able to delay starting to collect until age 70, that $2,300 check could have grown by 24% into a $2,850 one. Strategizing with a spouse can be a powerful income-maximizing move.
It’s well worth taking a little time to learn more about Social Security, because it’s likely to provide a meaningful chunk of your retirement income, and it’s worth getting as much out of the program as you can.
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Here’s When The Social Security Cost
Senior citizens and others who receive Social Security checks will soon see a 5.9% increase in their monthly payments, the biggest annual “raise” since 1982. But experts warn that the boost may not be enough to offset fast-rising inflation.
On top of that, seniors will be paying more for their Medicare coverage in 2022, which will also eat away at the increase in their Social Security benefits.
The cost-of-living adjustment, or COLA, goes into effect with the December benefits, but those will be paid in January. The payment dates are determined by the recipient’s birthdate:
- People born on the 1st through the 10th of the month will get their COLA-adjusted checks on January 12
- People born from the 11th to the 20th of the month will get their checks on January 19
- And those born after the 20th of the month will get their payment on January 26
The Social Security Administration said it mailed notices to all recipients in December to alert them to their COLA increase, but the information can also be found online in the message center in recipients’ my Social Security account.
The hope is that the more generous COLA increase that goes into effect next month could help seniors keep ahead of inflation, but experts are skeptical.
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Social Security Payments For July: When You’ll Receive Your Money
Learn the payout dates for July and what to do if you don’t receive your Social Security check this month.
Katie Teague
Writer
Katie is a Writer at CNET, covering all things how-to. When she’s not writing, she enjoys playing in golf scrambles, practicing yoga and spending time on the lake.
While the first and second rounds of Social Security payments have already gone out this month, they only cover half of all recipients. About 65 million Americans receive Social Security benefits, and to manage the massive mailing, the Social Security Administration sends out its monthly checks in four batches. The third and fourth rounds will be sent this week and next.
Due to the soaring inflation we’ve seen over the past year, Social Security benefits could soon see their largest increase in 40 years. You should receive a letter in December informing you of your benefit rate for the next year. You can also access your benefits online on the Social Security Administration’s website.
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Biggest Social Security Mistake
For most Americans, Social Security is their biggest retirement asset, but many don’t understand how it works. And it’s easy to make mistakes, said Laurence Kotlikoff, an economics professor at Boston University whose new book “Money Magic” which gives detailed advice on Social Security comes out early January.
The biggest mistake that people make? Claiming the benefit before they turn 70, when their monthly payments would hit their maximum, Kotlikoff noted.
Claiming Social Security benefits before you reach your full retirement age , reduces the annual payment you receive by about 7%.
But for each year you wait to claim beyond your full retirement age, your Social Security benefit rises as much as 8% per year. There are very few investments that earn that type of annual return, experts note.
“Only 6% wait until they are 70, and 80% should,” Kotlikoff said.
And with more baby boomers retiring early due to the pandemic, many might be tempted to claim Social Security benefits as soon as they can, which is age 62. But putting off claiming the benefit becomes increasingly important when inflation is high.
“You want a bigger share of your benefits protected against inflation, and that is what happens if you wait,” Kotlikoff advised.
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How To Acquire Your First Social Security Check
Social Security promises a lifelong payout of retirement benefits based on your earnings record. Yet, Social Security checks dont magically start to appear at your doorstep as soon as you retire. In fact, it can take some work to figure out exactly how Social Security works and what you have to do to get your first check. Heres a quick step-by-step guide so youll have the tools you need to initiate your Social Security retirement payments.
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If You Were Born On The First Or Second Day Of The Month
In addition to the age 62 exception, there is another exception if you are born on the first or second day of the month. For Social Security purposes, your birthday is actually the day before the actual birth date. If you were born on March 1 then Social Security considers you to be a February baby so your eligibility for benefits is based as if your birthday was in the previous month. If you were born on March 2 Social Security considers you to be born as of March 1. In this case, when you reach age 62 you would be considered age 62 for the whole month of March so your benefit would start in March and your first payment would be received in April.
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Types Of Back Payments
Back payments are paid for the months between the date you applied for disability benefits and the date you were approved for benefits. Due to the number of people that are applying for disability benefits and the time it takes to process your application, there is usually a long delay between your disability application date and approval date. But note that, for Social Security Disability Insurance benefits, Social Security has a five-month waiting period, so you’re only eligible to receive back pay for any delay beyond the waiting period .
Those who get SSDI back pay will also get payments for the months between when you became disabled and when you applied for Social Security Disability benefits. These are called retroactive benefits because you can get them even before you applied. These are benefits that you would have received if you had applied for benefits earlier.
Prioritize Your Basic Needs
Next, it’s time to allocate your Social Security benefits. Leonard Hayduchok, CEO and president of Dedicated Financial Services, suggests treating your Social Security check as you would a paycheck. Use the benefits to pay for regularly occurring expenses such as housing costs and groceries. According to the BLS survey, people 65 and older spend an average of the following amounts on food and related housing expenses a year:
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Housing: $17,472
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Utilities: $3,810
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Food: $6,599
You should try to allocate about 60% to 70% of your annual Social Security benefits to pay for these expenses, though that won’t be possible for many retirees. If your annual benefits equal the national average of $1,619.67 a month or $19,436.04 a year, that means 60% of your Social Security check — which comes out to $11,633.83 annually — won’t be enough to cover the expenses above.
Still, it’s a good idea to dedicate as much as you can to food and housing. After all, these are your basic needs — without them, you won’t live well. Just keep in mind that once you’ve used your check to cover these basic expenses, you’ll likely need to dip into your additional income sources to cover other costs.
Retirees whose food and housing costs are greater than their Social Security checks should look for ways to cut back on these expenses. For example, one option might be to move to a city where you can live comfortably off Social Security.
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When And How You Can Apply
The earliest you can claim retirement benefits is age 62, although you can apply for benefits as soon as you are 61 years and 9 months old if you want the benefits to start no more than four months into the future. For survivor benefits, the rules are different, as typically you become eligible at 60.
Understanding Social Security Payments
Social Security, officially known as the Old-Age, Survivors, and Disability Insurance program, provides monthly monetary benefits to qualified workers and their dependents . It’s considered an entitlement program, wherein employees, employers, and the self-employed finance these benefits with their Social Security taxes, which are then put into two Social Security trust funds. Eligibility and benefit amounts are based on an individual’s contributions to Social Security and work history ).
The SSA offers three types of Social Security benefits:
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When You’ll Receive Your Back Pay
You should receive your SSDI or SSI back pay in a separate check or direct deposit one or two months following your approval. You may receive it before or after you receive your first monthly payment.
To learn more about disability back pay in general, see Disability Secret’s section on Social Security disability backpay.
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Spouses And Social Security
You can claim Social Security benefits based on your spouse’s work record. If claiming spousal benefits provides more, claiming before your FRA on a spouse’s record means you’ll lose even more than claiming on your own recordthe benefit reduction for a spouse is 35% while the reduction for claiming your own benefit is 30%. For instance, if you’re the spouse of Colleen in the above example and you are the same age, you’d be eligible for only $650 a month at age 6235% less than the $1000 a month you would get at your FRA of 67.
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Your decision to take benefits early could outlive you. If you were to die before your spouse, they would be eligible to receive your monthly amount as a survivor benefitif it’s higher than their own amount. But if you take your benefits early, say at age 62 versus waiting until age 70, your spouse’s survivor Social Security benefit could be 30% less for the remainder of their lifetime.
The First Thing You Should Do With Your Social Security Check
Whether you’re 20 years old or 10 years away from retirement, it’s important to plan how you’re going to supplement your income and spend your money during your golden years. For many soon-to-be retirees, this means making a plan for their Social Security checks.
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Americans 65 and older spend an average of about $48,791 annually between 2016 and 2020 on essentials such as food, housing, transportation and healthcare, according to the Bureau of Labor Statistic’s 2019 Consumer Expenditure Survey. But the average monthly Social Security benefit for retired workers is $1,619.67 — which comes out to only $19,436.04 annually. If you plan to rely on Social Security alone, you’ll quickly realize that this amount probably isn’t enough to fully fund your retirement lifestyle.
Still, you don’t want to blow through your Social Security check. That’s why it’s important to carefully budget and spend your benefits wisely. Keep reading to learn more about what you should do with your Social Security check.
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How Are Back Payments Made
If Social Security approves you for SSDI only, you’ll most likely receive one lump-sum payment for the entire amount of your SSDI back pay.
If you’re approved for SSI, or you get approved for both SSI and SSDI, the rules are different. Social Security generally pays the past-due benefits for SSI or combined SSI/SSDI in three equal installment payments, separated by six months each. However, you are eligible for larger first and second installments if you need money for “necessities” or to pay off debts for necessities. Or, you may be eligible for one lump-sum payment if you are not expected to live past the next 12 months or you are no longer eligible for SSI benefits at the time you receive your back pay . For more information, read our article on lump-sum payments of back pay.