Turning 62 This Year? Your SS Retirement Age Goes Up and Benefits Down
Category: Financial and taxes in retirement
February 7, 2017 — If you will celebrate your 62nd birthday in 2017 or later, the age in which you are eligible for full Social Security benefits is on its way to 67. The full retirement age (FRA) will steadily increase in two-month increments from age 66 over the next six years, eventually reaching age 67 for those born in 1960 or later. This is not a new development, however. It has always been part of changes made the last time the Social Security program was overhauled, which was 1983.
The bad news is that your Social Security benefits are also taking a hair cut compared to your fellow boomers who were born prior to 1955. When your FRA becomes age 67, your benefits are affected in a negative way. For example, if you take your benefits when first eligible at 62 (you can still do that) you will now be getting 70% of your FRA instead of the 75% that someone who turned 62 last year or earlier received. And if you wait until the age where you get your maximum benefit, age 70 (also unchanged), you will now get 124% of your FRA benefit instead of 132%. The effect of this is that claiming strategies can change slightly. There is slightly less benefit for waiting to age 70 to claim, although you still get more by waiting than if you do not. You might want to speak with your financial advisor about how this impacts you.
When these changes were made in 1983 the idea was to help save Social Security by extending the age in which benefits were paid. It also reflects the fact that average life expectancies are now much higher than they were when Social Security was created.
Meanwhile for those who turned age 70 1/2 last year
When you turn age 70 and 1/2 you have a new requirement if you have money in IRAs, 401ks, or the like (but not Roth IRAs). The year after you hit that age (which about half of the first crop of baby boomers did last year) you must take your first Required Minimum Distribution (RMD) from all of those funds by April 1, and every year thereafter by Dec. 31. You could have taken the RMD last year, but if you didn’t you will have to make 2 payments in 2017 – your first one by April 1 and then the regular one by Dec. 31.
Comments? Is this new information to you or have you realized this all along? Please share any tips you have in the Comments section below.
For further reading:
Money: Full Retirement Age Starts Going Up This Year
Comments on "Turning 62 This Year? Your SS Retirement Age Goes Up and Benefits Down"
Louise says:
How do you calculate RMD? Is RMD across the board for every state or is it different for every state?
I have an inherited IRA for which I have to take RMD on each year and I am 63 years old. The amount has changed each year. Our Financial Adviser lets us know each year what the amount is but I have never questioned her on how this is calculated.
Linda says:
The RMD is calculated on the value of the account on December 31 the previous year. My account is at Fidelity and they automatically do the calculations and send the check every year. If you want more information as to the percentage each year, you could contact your financial adviser.
LS says:
The distributions are calculated differently for IRA owners and IRA beneficiaries. It can be a complex calculation and there are exceptions that can come into play. If you want to get into the nitty gritty of this, see IRS Publication 590b - https://www.irs.gov/pub/irs-pdf/p590b.pdf
Cheryl says:
Also, while you are required to take a RMD each year from an Inherited IRA, you do NOT have to take this RMD as cash distribution as Linda does. If the Inherited IRA account includes securities or mutual fund accounts, you can take your RMD by transferring shares of the security/mutual fund account that equal the value of the RMD into a non IRA brokerage account. The brokerage firm can give you instructions as to how to do this.
Karyl says:
If they want to increase the age for receiving social security through future years, they also need to pass laws that prevent the firings/layoffs/ of older people when they hit their 50's and beyond.
Louise says:
Karyl, you are SO right! The last job I had in 2011 I was laid off at age 58 along with 3 others who were 60, 54, 52 and they threw in a part time 20 year old. My opinion is that we were cherry picked because of our ages except for the 20 year old and I think they threw him in for unemployment purposes to show they weren't prejudiced against us 'older' employees. However, I don't see how they could pass a law preventing lay offs. The company I worked for for 4 years was on shaky grounds from day one I was hired. Maybe they could impose a harsh penalty or force them to pay the employee a huge settlement. However, then employers would avoid, at all costs, hiring an older person.
The government keeps raising the age for Social Security to get 100% of your benefit. You can still collect at age 62 but at a much reduced amount. Then the 'experts' tell us it is a bad thing to collect SS at age 62 but no one will hire you except Walmart as a greeter if you are lucky. So what do you do? You collect at age 62 because you have no income and according to the experts you are making the mistake of your life. Well, like Karyl mentions, something needs to be fixed for older workers who are expected to keep working till they are 68-70. In 'theory' it sounds good and the statistics say people are living a lot longer than they used to. So how do we keep older workers in the workforce? Maybe if the government offered incentives $$$ to keep older people working!
Kate . says:
Karyl: Those laws aready exist. However. I think most of us know that hidden age discrimination is alive and well. Employers have simply learned how to hide it better. And even with the laws, nothing prevents any employer from firing/laying off employees due to restructuring or cost-cutting measures that may affect higher-paid seniors more. I agree with you though that increasing the age for receiving social security just makes it harder and harder for people to get full benefits. I'm still working in mid 60's in a high-stress office job with very long hours. It's physically harder and more stressful to go
into the office every day, and I am sure I won't be able to make it even to 66 -- whether from layoff, or health problems from the stress. I can't imagine how people with more physically demanding jobs are expected to keep working.
Your editor says:
For more information about RMDs and 401ks in general, see our article: "You and Your IRA and 401k: An Owners Manual".
At age 70.5 you must take out 3.65% of all your balance(s), by age 100 that rises to 15.87%. The IRS has tables to show you the calculation, but the firms that handle your money will generally tell you what you have to take out.
Louise says:
Kate, I am sure you have assessed your options but when it comes to your health, you really should think more about getting out if you have a way to do so. If you are 65 and waiting till 66 for SS figure out what the difference dollar wise would be if you started collecting a year earlier. For an example, if it is like $30 a month, that would be $360 a year. Every penny is important but if you have saved diligently, maybe that $360 a year isn't worth sticking it out. Your health is much more important. My Hub was totally stressed out with his job and we did all the calculations, figured his SS, and IRA's and what we could pull out per year. We made a list of all our bills and we had no credit card debt. We had to have health insurance so I checked out Obamacare, plans and prices. Hub was 63 and it all fell into place. He worked till April 1st 2015 and was able to keep his health insurance for one month by working one day in April so we got on Obamacare May 1st 2015. We pulled out money out of the IRA's to cover the rest of the year with Hubs SS and pension money. Then the following year (2016) I started collecting SS at age 62 1/2. We then were able to pull out less money out of IRA's. My Hub has a new outlook on life and it was the best decision for him to retire early! I hope you can find a way to escape the madness.
Louise says:
7 ways to maximize Social Security benefits:
http://money.cnn.com/2015/03/19/retirement/social-security-benefits/
Editor's Comment: This Money article is based on information that has now changed. For example, if you didnt do it already File and Suspend is now a thing of a the past. Better to look at these Topretirements articles:
http://www.topretirements.com/blog/financial/social-security-a-lot-more-complicated-than-you-think.html/
http://www.topretirements.com/blog/financial/turning-62-this-year-your-ss-retirement-age-goes-up-and-benefits-down.html/
Kate . says:
Louise - I agree completely! I have another year to go until 65 (my goal is to wait to leave to qualify for Medicaid, although I may not make it). I've got three weeks of vacations booked, which are going to help me get through this year...I hope.
Louise says:
Kate, good luck on reaching 65 to retire. Remember, you are eligible for Medicare the first of the month of your birthday month. Hubs birthday is March 7th and his Medicare starts March 1st.
mary11 says:
I agree Louise. I don't feel most people calculate over a 25 to 30 year span how much of a monthly increase on their SS payment by waiting to 66. In my case it turned out to be approximately $67 monthly. So that adds up to maybe not going out for dinner or whatever else you can do without such as less cable channels. I can go without that and have less stress in my life.
Louise says:
Kate, another thing my Hub did that he immediately regretted was giving his notice/retirement about 2 months in advance! He couldn't hold it in any longer and announced it. Then those two months seemed to drag on for 20 years! His employer was very good to him and told him to take all his personal days and sick days. Any days that he couldn't take with him. So he was working about 3 days a week for about 6 weeks. He even called in several times when we had snow storms. He NEVER took any time off during his 9 years there. Even with that, he was going nuts waiting to leave!
We have just had our 2nd bad storm here in CT just days apart and Hub is out snow blowing and we are waiting for a guy to plow us out. The wind is blowing about 45 miles an hour and it looks like a blizzard but it is just snow blowing off the roof and trees. He is very crabby right now and want to move where there is no possibility of snow ever! He is sick of this weather and we are due to get another storm on Wednesday! Oh, NO!
Louise says:
This article is 4 years old. Does anyone agree with this author saying that you basically don't need supplemental Medicare insurance? It doesn't mention surgery in the article or cancer treatments.
http://www.huffingtonpost.com/david-belk/medicare-supplemental-policies_b_3901861.html
mary11 says:
I kind of agree with the article. ....on an average if you pay for additional coverage you'd be paying more than what you would be receiving. My preference is to not get it and save or invest the money in case you do need it and perhaps sign up for more coverage when you're older.
ella says:
Kate,
I spoke to my brother on the phone this past Sunday. He lives on Long Island in NY. He asked me how many inches of snow we had here in NE Tennessee. I told him that my husband and i were taking a walk as i spoke to him. It was almost 70 degrees and we were wearing short sleeved shirts. We both had a good laugh. It's not always this warm here by a long shot, but it has been very nice to miss the blizzards!
MaryNB says:
Well, I have had cancer twice and I can tell you one thing, there is no way an average person could possible save up enough money to cover the cost of cancer treatments. I had to pay 20% and even that was outrageous! I don't think that once you are sick, you can then sign up for more coverage. If you think you can get good cancer care if you don't have the money to pay for what insurance doesn't cover, you are wrong. Something to consider when you think of just getting the basic medicare coverage.
Jim C says:
I had arterial blockage that required stents. This happened on two separate occasions just after getting on Medicare. The billing to Medicare was 100k each time. With plan F There was zero out of pocket. Personally I wouldn't want to take that gamble.
Sue M says:
I personally would NEVER consider just medicare. As said here 20% can be a lot. Both my husband & myself are cancer survivors, myself I am still on a maintenance of every 3 months & both of us this happened within a year of retirement. As a former government worker I was able to take my insurance into retirement for both of us & in no way would I give it up. Even after both medicare & my state pay there is still "your share" so far it has been erased or whatever they call it & thus we've not paid one cent (knock on wood) My state ins. also covers prescriptions so we have been very fortunate. Again everyone is different & has different needs but as we age it ain't getting any better & you need to think about the insurance remembering each year you can change or look into what is available.
Sue M says:
PS - Happy Valentine's Day
Louise says:
According to this article it looks as if once you select a Medigap plan you are locked in if you should want to change to a cheaper plan down the road. I always thought you could change each year. https://www.medicare.gov/supplement-other-insurance/when-can-i-buy-medigap/switching-plans/switch-medigap-.html#collapse-2514
I agree with MaryNB, Jim C and Sue M. I would be afraid to be without a supplemental Medigap plan. My Hub has surgery last year and the bills were very scary and fortunately our obamacare insurance did pay more than I ever expected. Another thing I thank God for and I pray that these politicians can fix obamacare and not destroy it. Hub will be off it in a few weeks to Medicare and I have to wait till 2018 but I do know people need health insurance.
I was told once that insurance is the one thing you buy that you hope you will never use!
Editor's Note: We definitely seemed to have veered into Medicare territory here and not Social Security (but the Comments are all interesting). Suggest if you want more info on that and to see many many Comments, go to:
http://www.topretirements.com/blog/health-issues/dont-make-these-5-medicare-mistakes.html/
That article in turn has links to many other helpful articles
Admin says:
Q (from sjperper): Does the money I earn after age 70, (which I pay social security tax on) count in the calculation of my social security benefit which I started collecting at age 70?
A: That is a a great question. Based on this SSA publication, it would seem that the answer is: If your earnings in a year after age 70 increase your average earnings calculation, your benefit will increase (assuming you are not already at the maximum) https://www.ssa.gov/pubs/EN-05-10069.pdf
This is from that publication:
Q:Are there other ways that work
can increase your benefits?
A:Yes. Each year we review the records
for all Social Security recipients who
work. If your latest year of earnings
turns out to be one of your highest
years, we refigure your benefit and
pay you any increase due. This is an
automatic process, and benefits are paid
in December of the following year. For
example, in December 2017, you should
get an increase for your 2016 earnings
if those earnings raised your benefit.
The increase would be retroactive
You can check with your SS office to verify. It should be automatic though.
Amy Diamond says:
Will 55 year old people who have SSDI, not SSI, receive the stimulus package? I am 55, I receive Social Security Disability Income (not SSI), and I am part of the Traumatic Brain Injury Waiver program in New York State
Editors Comment: HI Amy, yes, everyone on SS, whether it is SSDI or SSI will get the stimulus package. Unless he or she makes more than $98,000. See our article on it:
https://www.topretirements.com/blog/financial/yes-social-security-recipients-will-get-stimulus-check.html/ with Comments from others. We will also post that on that Blog