As we turn the page into a new year, many people think about how old they will be when they blow out their birthday candles. If you’re turning 66 this year, you should be aware of three main benefits Social Security offers.
1. Full benefit eligibility.
If you were born between 1943 and 1954, age 66 marks when Social Security deems you eligible to draw your full retirement benefit. The building block in calculating benefits is based on your primary insurance amount (PIA). Your PIA is the base benefit you will receive from Social Security at your full retirement age. Further discounts, if you draw earlier than full retirement age, or credits, if you delay drawing are added to this PIA amount to determine your benefit.
2. Maximize your spousal benefit.
If you delay drawing Social Security until your full retirement age you have the ability to collect 50% of your spouse’s benefit. Many people think that they are entitled to collect 50% of their spouses benefit no matter when they apply. For some, this is more than the benefit based on their own earnings record. For others it is a strategy to delay collecting their own benefit until age 70, while still collecting a benefit under their spouse’s earnings. According to the Social Security 2013 Annual Statistical Supplement, 76% of women and 70.9% of men receive reduced benefits. Obviously, this is a significant benefit that is often overlooked.
3. Increase your earnings potential.
The third thing to consider during the year you turn 66 is your ability to earn $41,880 prior to your birthday month. This is significant because many people fail to realize this is an increased amount from the regular annual earnings limit of $15,720 or monthly benefit of $1,310 in 2015. In essence, earnings incurred before your birthday are calculated differently than in the months after you turn age 66.
Social Security is complex. We advise retirees to seek financial counsel prior to applying for benefits.