Social Security was originally intended to provide older Americans with continuing income after retirement. It was not intended to be anyone’s sole source of income during retirement. Today, though the scope of Social Security has been widened to include survivor, disability and other benefits, retirement benefits are still the cornerstone of the program. Proper planning offers you ways to maximize your benefit from this source, while creating other income sources as well.

How do you qualify for retirement benefits?

When you work and pay Social Security taxes (FICA on pay stubs), you earn Social Security credits. You can earn up to four credits each year. You generally need 40 credits (10 years of work) to be eligible for retirement benefits. Since 1978, you earn up to a maximum of four credits per year. The amount of earnings it takes to earn a credit may change each year. In 2022, you earn one Social Security credit for every $1,510 in covered earnings each year. You must earn $6,040 to get the maximum four credits for the year. This is important to consider.

How much will your retirement benefit be?

Your retirement benefit is based on your average earnings over your working career. Higher lifetime earnings result in higher benefits, so if you have some years of no earnings or low earnings, your benefit amount may be lower than if you had worked steadily. Your age at the time you start receiving benefits also affects your benefit amount. Although you can draw benefits early at age 62, the longer you wait to draw (up to age 70), the higher your retirement benefit.

When calculating your retirement benefit, the Social Security Administration will consider your highest 35 years of earnings. So, while you may have earned enough early on for qualifying quarters, it is possible your part-time work while in school qualifies you for coverage but won’t necessarily reduce your benefit if your earnings were considerably higher later in your career.

Full Retirement Age

Your full retirement age (FRA) depends on the year in which you were born.    

Tip: If you were born on January 1 of any year, refer to the previous year to determine your full retirement age.

If you begin drawing benefits at FRA or later (up to age 70), you'll receive an unreduced retirement benefit.

Drawing early will reduce your benefit

You can begin receiving Social Security benefits before your full retirement age, as early as age 62. If you draw benefits early, however, your Social Security benefit will be less than if you wait until your full retirement age to begin receiving benefits. This reduction is permanent—the benefit will not increase once you reach full retirement age.

This is where planning becomes critical. If you are going to draw benefits early, do you need to draw Social Security or do you have other assets you can draw on to get you to your FRA? Are you going to work part-time until your FRA? Would it make more sense to start drawing from a very large IRA or 401(k)?

Delaying retirement drawing benefits will increase your benefit

For each month that you delay receiving Social Security retirement benefits past your full retirement age, your benefit will increase by a certain percentage. This percentage varies depending on your year of birth. For example, if you were born in 1943 or later, your benefit will increase 8 percent for each year that you delay receiving benefits, up until age 70. In addition, working past your full retirement age has another benefit—it allows you to add years of earnings to your Social Security record typically at a higher earnings rate. As a result, you may receive a higher benefit when you do draw early, especially if your earnings are higher than in previous years.

Working may affect your retirement benefit

You can work and still receive Social Security retirement benefits, but the income that you earn before you reach full retirement age may affect the amount of benefit that you receive. Here's how:

• If you're under full retirement age: $1 in benefits will be deducted for every $2 in earnings you have above the annual limit
• In the year you reach full retirement age: $1 in benefits will be deducted for every $3 you earn over the annual limit (a different limit applies here) until the month you reach full retirement age

Once you reach FRA, you can work and earn as much income as you want without reducing your Social Security retirement benefit. And keep in mind that if some of your benefits are withheld prior to your full retirement age, you'll generally receive a higher monthly benefit at full retirement age, because after retirement age the SSA recalculates your benefit every year and gives you credit for those withheld earnings.

Retirement benefits for qualified family members

Even if your spouse has never worked outside your home or in a job covered by Social Security, he or she may be eligible for spousal benefits based on your Social Security earnings record. Other members of your family may also be eligible. Retirement benefits are generally paid to family members who relied on your income for financial support. If you're receiving retirement benefits, the members of your family who may be eligible for family benefits include:

• Your spouse age 62 or older, if married at least one year
• Your former spouse age 62 or older, if you were married at least 10 years
• Your spouse or former spouse at any age, if caring for your child who is under age 16 or disabled
• Your unmarried child under age 18
• Your unmarried child under age 19 if a full-time student (through grade 12) or over age 18 and disabled if disability began before age 22

Your eligible family members will receive a monthly benefit that is as much as 50 percent of your benefit. However, the amount that can be paid each month to a family is limited. The total benefit that your family can receive based on your earnings record is about 150 to 180 percent of your full retirement benefit amount. If the total family benefit exceeds this limit, each family member's benefit will be reduced proportionately. Your benefit won't be affected.

How do you apply for Social Security retirement benefits?

The SSA recommends that you apply three months before you want your benefits to start. To apply, fill out an application on the SSA website, call the SSA at 800.772.1213, or make an appointment at your local SSA office.

What if I change my mind about when to begin Social Security benefits?

You have a limited opportunity to change your mind after you've applied for benefits. You can complete Form SSA-521, Request for Withdrawal of Application, and reapply at a later date. But if you're already receiving benefits, you can only withdraw your claim if it has been less than 12 months since you first became entitled to benefits, and you're limited to one withdrawal per lifetime. In addition, there are financial consequences—you must repay all benefits already paid to you or your family members based on your application, as well as any money withheld from your checks, including Medicare premiums, or tax withholding. Contact the Social Security Administration at ssa.gov for more information.

Working with your Wealth and Tax Advisors can help you sift through all of this to make informed decisions for you and your family. To learn more about the comprehensive retirement planning services and more offered by Busey Wealth Management, visit busey.com/wealth-management.

This is not intended to provide legal, tax or accounting advice. Any statement contained in this communication concerning U.S. tax matters is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties imposed on the relevant taxpayer. Clients should obtain their own independent tax advice based on their particular circumstances.

This material is provided for educational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities.

This presentation is for general information purposes only. It does not take into account the particular investment objectives, restrictions, tax and financial situation or other needs of any specific client.

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