We received very enthusiastic responses from folks who attended our recent webinar, Maximizing Social Security Benefits. As always, Matt Wilson, Keen Wealth's President and Chief Investment Officer, did an outstanding job of presenting up-to-the-minute information explaining some strategies for integrating Social Security into a comprehensive financial plan.
On today's show, we're complementing that webinar by answering some of the follow-up questions that Matt fielded. Taken together, this podcast and webinar will give you a thorough overview of Social Security, as well as important insights into the finer details and some recent changes that we've been monitoring at Keen Wealth.
1. "For a married couple, how does delaying the higher earner's Social Security benefits maximize the survivor's benefit for the lower earner?"
To qualify for Social Security, you need to earn 40 credits, meaning 40 quarters of earning income and paying FICA tax. The longer you delay taking your Social Security, the larger your benefit grows until it maximizes at age 70. If your spouse doesn't earn those 40 credits, he or she still qualifies for a reduced spousal benefit.
If the higher earner passes away, the surviving spouse is eligible to receive whoever's Social Security benefits were higher starting at age 60, provided that the couple was married for at least nine months and the widow or widower does not remarry before age 60. So in this scenario, if the surviving spouse is the lower earner and met those qualifications, he or she could receive the increased benefit that the deceased earned by delaying Social Security.
2. "How long does it take to receive your first Social Security check after you apply for your benefits?"
The Social Security Administration recommends that seniors apply 3 months before they want their benefits to begin. No guarantees, but we've had some clients apply and receive their benefits in about a month.
As to how you apply, you can use the SSA's website or head down to your local Social Security office. We do recommend that folks who want to apply in person head down to the office early in the day to reduce your wait times. You can also set up your online account well before you're ready to retire if you want to familiarize yourself with the website and check on your benefits.
3. "If you delay taking Social Security until age 70, do you receive the annual cost-of-living adjustments (COLA) in the meantime as well?
Every October, the SSA announces the cost-of-living adjustment for the following year's benefits, which is designed to help seniors cope with rising costs. On a recent podcast, we discussed speculation that the 2023 COLA could go as high as 10% due to above-average inflation this year. And given this week's Consumer Price Index Report, which showed prices rising slightly in August, that 10% figure is looking more and more likely.
Circling back to the question: Yes, if you delay your Social Security benefits, you earn an 8% annual increase, as well as annual COLA while you wait. And even in years when the COLA is more modest, those increases to your benefits compound and add up! Larger benefits are a big reason why, generally, we recommend folks delay taking Social Security if they can.
4. "Can I still receive my Social Security benefits if I move overseas in retirement?"
If you're eligible for Social Security you remain eligible even if you move to a different country. But the SSA will only send you your check if you live in one of these 29 countries.
If your dream retirement destination isn't on that list, you ask the SSA to keep mailing your checks to a U.S. address or P.O. box.
5. "How are Social Security benefits taxed if one spouse is still working?"
Your benefits are taxed based on your provisional income. Married couples filing jointly who earn less than $32,000 pay no tax on Social Security. Couples who earn between $32,000 and $44,000 pay taxes on 50% of their benefits. And if a couple earns above $44,000, 85% of their benefits are taxable. So, if your spouse is working, the more income you're earning, the more of the non-working spouse's benefits will be considered taxable income on your joint tax return.
Don’t hesitate to get in touch with my team at Keen Wealth if you have any Social Security questions we didn’t cover in our podcast or webinar. Matt’s also hard at work prepping for his upcoming Q4 Outlook Webinar, so if you’d like to attend that event and get updates on all of our educational content, click here to join our mailing list.
Bill Keen is a CHARTERED RETIREMENT PLANNING COUNSELOR℠ and independent financial advisor with more than 25 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
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