Social Security tips: Do your homework before making a decision
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The Social Security website, www.socialsecurity.gov, is a good place to start thinking about if and when to collect retirement benefits -- and to determine those benefits. The system no longer mails individuals a yearly estimate of retirement benefits.
Social Security representatives will explain the rules, but they won't offer advice. So you'll have to do your own homework to figure out what is best for you.
The website has a wealth of information, including a personal retirement estimator of your benefits based on your work history. It will give you monthly benefits you can expect at age 62, 66 and 70.
Social Security benefits are based on the average of a worker's highest 35 years of earned income. If you haven't paid into the system for 35 years, the administration averages in zeros for those years.
Workers pay 6.2 percent of their income into the Social Security system and employers pay the same.
• There is a penalty for working and collecting Social Security at age 62, the first year most people can draw benefits. For every $2 in earned income a person makes over $14,000, you will lose $1 in Social Security benefits. You don't actually lose the benefits, but they will be delayed and added to later payments.
• A spouse may decide to collect Social Security benefits based on a partner's work history or their own, whichever is higher. Spouses can collect half of the partner's Social Security benefits. Some people let their own benefits build while drawing on a spouse's earnings.
• A divorced person may collect on a spouse's Social Security benefits, instead of his own, if the couple was married at least 10 years.
• Widows and widowers can begin drawing Social Security benefits on a spouse's earnings at age 60, provided they have not remarried. You can allow your own Social Security benefits to grow untouched, and decide to switch later to collect the higher benefit.
• Dependent children under the age of 18 may be eligible for Social Security benefits when their parent begins to draw full retirement-age benefits. So older parents have this extra benefit.
• Give some thought to what your retirement plan will be. Social Security is the largest source of income for elderly Americans today, but it was never intended to be the only source of retirement income. You also will need savings, investments, pensions or retirement accounts to make sure you have enough money to live comfortably when you retire.
• Plan ahead. The best way to begin planning for retirement is by using available, free resources. Start by using the administration's Retirement Estimator, where you can get a personalized estimate of your future retirement benefits using different retirement ages and scenarios. Visit www.socialsecurity.gov/estimator.
• Make sure you have all your numbers. One of the most important things you need is a Social Security number for everyone you will claim as a dependent.
• Browse the administration's online library of publications: www.socialsecurity.gov/pubs.
• Retirement may be longer than you think: About one of every four 65-year-olds today will live past age 90.
• You can sign up for Social Security benefits three months before you want to begin collecting. Apply online or in person at your local office.
Call 1-800-772-1213 from 7 a.m. to 7 p.m. Mondays through Fridays to speak with a representative. Hearing-impaired should call 1-800-325-0778.
First Published July 26, 2012 12:00 am