March 26, 2010

I am retiring at 62. I read that I can apply for wife's benefits now and wait to apply for my own retirement at 70. Is that true?

The option to choose a wife's (or husband's) benefit first and then apply for your maximum retirement benefit at age 70 has been promoted on the internet and in newspaper articles for many years. This strategy can be very effective in maximizing lifetime income from Social Security benefits, but it may not be the best option for you.

Why not? Applying for a spouse's benefit first can preserve your right to claim your own maximum retirement benefit at age 70, but you and your husband have to meet certain requirements under the law to take advantage of this strategy:

  1. Your husband has to apply and qualify for Social Security benefits before you can qualify for a wife's benefit, AND
  2. You have to wait until your FRA to apply for the wife's benefit to take advantage of the higher retirement benefit on your own work record at age 70.

Assuming you meet these basic requirements, you should also consider:

  • Will you and your husband have enough income from other sources from age 62 through 66 to pay your living expenses and
  • Will your age 70 retirement benefit rate will be high enough to make this strategy worthwhile over your expected lifetime?

Whatever you decide, be sure to get the facts before you apply. If you change your mind later, you can withdraw your application but you will have to repay all benefits paid to you before Social Security will approve your request for a "do over."

March 20, 2010

What is the difference between Social Security disability and retirement?

The biggest difference is that Social Security disability benefits may payable at any age while the minimum age for retirement is age 62.

In general, disability benefits are higher than retirement benefits with a few exceptions:
  • There is no advantage to applying for disability after your full retirement age (FRA) unless you can qualify for at least one month's benefits before your FRA month.
  • If you receive worker's compensation benefits that offset all or part of your Social Security disability AND are at least age 62, you may elect to receive a higher retirement benefit until the worker's compensation payments end.

Can't afford to wait several months to hear whether your medical condition qualifies for disability? If you are between 62 and your FRA, you can apply for a reduced retirement at the same time you apply for disability. Your initial benefit will be less but you will get your retirement each month while you are waiting to hear about your disability claim. If you are approved, Social Security re-figure your benefits to the higher disability rate.

And if you are approved for disability benefits effective with age 63 or earlier, you will qualify for Medicare before age 65. There is a two year waiting period for disability Medicare that begins with the first month you are eligible for a disability payment.

March 12, 2010

Will it affect my Social Security if I stop working before I am 62?

Congratulations on your early retirement! But before you make your final decision, take a look at your Social Security statement and read the fine print on the page with your estimated benefits.

Under Retirement, it says "At your current earnings rate, if you stop working and start receiving benefits at age 62, your payment would be about....." and then lists an amount.

Below that, it says "If you continue working until age 66 (or your full retirement age if different), or until age 70, your payment would be about...." and lists those amounts.

So what happens if you stop work at 55? If you have at least 10 years (40 credits) of work, you will qualify for a retirement benefit but it will be less than if you continued working longer. Since your retirement benefit is based on your highest 35 years of earnings under Social Security, retiring before age 62 will leave you with a lower retirement benefit than shown on your statement.

But there are also other consequences of retiring early. If you become disabled due to a serious accident, injury or illness, you may not be eligible for Social Security disability payments if you have not worked at least 5 years during the 10 years before you become disabled. As long as you have at least 40 credits, you will still be eligible for retirement benefits at 62 but a disability benefit is usually higher because it is not reduced for your age and could entitle you to Medicare before age 65.