5 Little-Known Laws That Could Improve Social Security Payments
Planning is important if you’re looking for Social Security, but keeping up with all the rules that apply to your benefits can be a challenge.
Missing these details can reduce your gains, and the little moves you make today can improve overtime. Here are five Social Security rules you may not know.
1. The income test disappears when you reach full retirement age
If you claim your Social Security benefits before your full retirement age (66 or 67, depending on when you were born) and continue to work and earn above a certain threshold, you will be subject to the Social Security Administration’s (SSA) earnings test. The test reduces your benefits temporarily before you reach full retirement age, but then you get money added to your benefits when you reach full retirement age.
The idea behind this law is to postpone some of your benefits so that you can receive them at a time when you are no longer earning from work. The benefits test does not apply once you reach full retirement age.
Pet Protection: See Lemonade’s pet insurance options – save and protect your cat or dog from high pet bills
2. You can pause and resume benefits to increase them
Most people know that they can claim Social Security at age 62, but you may not know that you can stop your benefits once you reach full retirement age. If you do, your benefits will increase by 8% per year, plus inflation. They will restart at age 70, or you can restart them earlier, too.
This strategy can work well for people who decide to return to work after filing for Social Security or choose to use their nest egg as a financial bridge to cover living expenses for a few years, allowing their benefits to grow uninterrupted.
Free Stock Opportunity: Get up to $1,000 in stocks with a new, funded SoFi Invest account
3. Are you divorced? You may be eligible for a spousal benefit
If you are divorced after being married for at least 10 consecutive years and are currently single, you may be eligible to receive up to 50% of your ex-spouse’s full retirement benefit. Claiming this benefit does not affect your ex-spouse’s Social Security earnings, and you can even claim it if your ex-spouse remarries.
Divorced retirees who did not earn a high income can benefit from this rule if their ex-spouse is a high earner.
4. You can cancel your application once and start over
Some people immediately regret taking Social Security early.
Fortunately, the Social Security Administration offers a one-time “do-over.” Within 12 months of making a claim, you can withdraw your claim, pay all the benefits you received and start over later. That way, you end up with a higher Social Security check if you decide to claim your benefits in the future.
Save Smartly: Manage your money with the Rocket Money budgeting app
5. COLAs still apply if you wait
Cost of Living Adjustments (COLAs) will increase your Social Security payments whether you claim them immediately, stop benefits after full retirement age or wait until age 70 to enter the program. Retirees don’t miss out on inflation protection while they wait, and waiting can result in higher lifetime benefits.
