When to collect social security: why you should wait
However, the benefits withheld are not lost forever. At the beneficiary’s full retirement age, Social Security will adjust the monthly benefit upwards to reflect the benefits withheld. The beneficiary will continue to receive the highest payment even after recovering the withheld benefits, which could take 12 years.
Here’s how it works: Suppose a person qualifies for a benefit of $ 24,000 per year at full retirement age, but claims at 62 and receives a reduced benefit of 16. $ 800. If the recipient earns $ 25,000, the government will withhold $ 3,020 for the year, which is half of the earnings above the cap. At full retirement age, the beneficiary will continue to receive the reduced benefit of $ 16,800, but will eventually recover the money withheld in the form of a higher benefit.
James Blair, the senior consultant for Premier Social Security Consulting in Cincinnati, said he advises active clients to balance the Social Security income they will receive by applying early with the permanent reduction in benefits.
“If Social Security withholds two or three checks, they’ll be paid for most of the year,” said Mr. Blair, a former Social Security administrator. “If they only get two or three checks, it’s usually best to wait to claim. “
Can a person who is entitled to a public pension also receive social security benefits?
Two rules could reduce benefits for people who are also entitled to a state pension on income not covered by social security.
One rule is the ‘exceptional disposal provision’ (known as WEP), which applies to people who have held jobs covered by Social Security but have also worked as government employees not covered and owe a pension.
When it comes to claiming benefits, many people are unprepared for these cuts, Blair said. Any WEP-related reductions are not reflected in the worker’s Social Security statement, which shows annual earnings history and future benefit estimates only for Social Security-covered jobs.