This article explains the terminology and concepts that you should be familiar with as you determine your best Social Security claiming strategy. As you work through this process, keep 3 things in mind:
- Claiming Social Security benefits is a one-time decision that you must get correct.
- A married couple needs to look at this decision as a joint life decision, not as individuals in a silo.
- Take the wrong benefit at the wrong time, and it will always be wrong – forever!
Annual Earnings Limitation – required withholding of monthly Social Security benefits before your full retirement age if earnings from wages or self-employment income exceed $21,240 in 2023. At full retirement age this provision expires so you can earn any amount of money without any required withholding of benefits.
Children’s Benefit – one parent needs to be receiving their Social Security benefit. This benefit is equal to 50% of workers’ full retirement age benefit if child is not married, and under 18, under 19 if still in high school.
Delayed Retirement Credits – increase in monthly Social Security benefits if you delay claiming benefits after your full retirement age. These credits are awarded up to the age of 70. Your monthly benefit could be increased by as much as 32% at age 70. Delayed retirement credits only accrue to your own Social Security benefit.
Ex-Spousal Benefit – basically the same benefit as the current spouse, up to 50% of the ex-spouse’s primary insurance amount at your full retirement age. Must be single, both at least 62 and married 10 or more years. If divorced less than 2 years your ex-spouse must be receiving their Social Security benefit. If divorced more than 2 years, ex-spouse need not be receiving their benefit.
Full Retirement Age – the age at which you qualify for full unreduced monthly benefits. This age ranges from 66 to 67. Any time you claim benefits early, between 62 and your full retirement age, they will always be reduced.
Government Pension Offset – impacts spouses, ex-spouses and survivors who are public employees receiving a non-covered pension. This provision reduces the Social Security benefit you may receive as a spouse, ex-spouse or survivor by 67% of the monthly amount of the non-covered pension. This provision can eliminate your Social Security benefit as a spouse, ex-spouse, or survivor. This reduction does not start until you start collecting your non-covered pension.
Income Related Monthly Adjustment Amount-IRMAA – this adjustment amount to your Social Security benefit represents a reduction in your monthly benefit for the payment of Medicare Part B and Part D premiums because you are categorized as a higher income earner. It is based on your Modified Adjusted Gross Income reported on your tax return two years prior.
Non-Covered Pension – a pension received usually by state or local government employees and generally federal employees hired before 1984 where Social Security taxes are not withheld.
Primary Insurance Amount – the amount equal to your Social Security benefit at full retirement age.
Restricted Application – a claiming option at full retirement age or later if you were born before January 2, 1954, which allows you to receive spousal benefits while deferring your own worker benefit to earn delayed retirement credits.
Retroactive Benefits – if you have earned delayed retirement credits, the ability to receive a maximum of up to 6 months benefits up front when you claim your Social Security benefit. The effect of this is to push your retirement filing date back creating a lower monthly Social Security benefit going forward and a smaller survivor benefit in the future.
Spousal Benefit – benefit available to your current spouse of up to 50% of other spouse’s primary insurance amount at your full retirement age. Other spouse must be receiving their Social Security benefit. You must be married at least 1 year.
Survivor Benefit – benefit paid to spouse, ex-spouse, and young children if survivor is at least 60 years old, married for at least 9 months, and currently unmarried. If disabled, age requirement is 50.
Voluntary Suspension – at full retirement age or later, the ability to suspend your own worker benefit to earn delayed retirement credits.
Windfall Elimination Provision – impacts public employees receiving a non-covered pension and eligible for Social Security benefits. It is a reduction in your own Social Security worker benefit of up to $558 in 2023 if you do not have at least 20 years of substantial earnings in the Social Security system. This reduction will not eliminate your Social Security benefit. This provision phases out if you have substantial earnings in the Social Security system between 20-30 years.
Worker Benefit – sometimes called the Number Holder. This is the Social Security benefit you earned working for wages or self-employment income. Any time you claim a Social Security benefit, if you have your own worker benefit, you are always paid this benefit first.