Three strange retirement rules in the US that not everyone understands
Social Security is a confusing program, but an important one. There are a huge number of different rules that can affect how much retirement income you receive and the types of benefits you are eligible for. MSN.
Unfortunately, if you don't understand some of the basics, you may not enjoy all the benefits you are entitled to, or you may inadvertently receive less money than you should. So make sure you are aware of these three weird rules that often take people by surprise.
- You may still be able to receive Spousal Retirement or Survivor's Benefit after a divorce.
Survivor's and spouse's retirement benefits are critical sources of income for millions of people who are either not eligible for their own benefits or who can get more money by claiming benefits based on the seniority of a spouse with a higher earnings.
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Unfortunately, too many people think you have to be married to take advantage of these programs. And that's just not the case. The reality is that anyone who has been married for at least ten years before a divorce can qualify for these benefits. This is true for survivor benefits if you did not remarry before age 60, or before age 50 if you are disabled. And that goes for spouse retirement benefits if you never remarried at all.
The Social Security Administration does not always warn divorced people that they may receive higher monthly benefits by referring to the former's work record. You should know these rules if you're going through a divorce and want to maximize your retirement income.
- You can work indefinitely while receiving benefits after you reach full retirement age, but you may be fined for working early.
Another strange welfare rule concerns work and benefits. If you choose to double down and get paid while still receiving your retirement income, you may be surprised to find that your Social Security benefits are being cut or, in some cases, completely eliminated.
If you have already reached your full retirement age (FRA), you can work as long as you want without losing any Social Security income. The full retirement age depends on when you were born, but it falls between 66 and four months and 67 years. If you've reached this milestone, don't worry about how big your salary is - you can still receive retirement benefits (although you may find yourself being taxed on more of your benefits).
However, if you are under retirement age, you risk losing some of your Social Security funds temporarily. You are losing:
- $1 for every $2 earned in excess of $19 per year, or $560 per month if you don't reach FRA at all during the year you work;
- $1 for every $3 earned above $51 per year, or $960 per month if you reach an FRA at some point.
The Social Security Administration stops sending full payments to cover the amount you lost. Then, when you reach full retirement age, benefits are recalculated and your monthly income increases slightly. Social Security refunds you early filing fees.
This rule can come as a big shock if you expected to be able to get Social Security benefits while earning extra income on top of it.
3. You cannot earn deferred pension credits if you are receiving a spouse's pension.
If you choose to receive Spousal Retirement Benefit, claiming it early (that is, before you reach full retirement age) may reduce the amount of benefits due to early claim penalties. However, you do not have the opportunity to earn additional credits for postponing retirement to increase the amount you receive.
Since you cannot receive more than 50% of your spouse's standard benefit, there is no point in waiting for you to reach full retirement age to claim spousal welfare benefits.
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These three rules may seem surprising, but they are worth knowing to ensure you receive your full Social Security monthly income.
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