If you are nearing the age of 62, and particularly if you have been laid off or your work reduced due to the coronavirus, you may wonder if it’s time to take social security benefits.
While you can that doesn’t necessarily mean you should. The Social Security Administration has on their site a benefits calculator which can help you figure out how much you will receive each month. Perhaps the most important consideration is that once you begin taking your benefits they will not change. If you take your benefits at age 62 you will receive 75% of what is owed to you – this is because you will be receiving benefits longer. If you take your benefits at your full retirement age (this age depends on your year of birth which you can find out here) you will receive 100% of the benefits due to you.
So, as you are considering whether you can make ends meet, keep in mind that if you continue to work before you reach your full retirement age your benefits will be reduced. The good news though is that your benefit will be adjusted based on your continued work and added to your benefit amount once you reach full retirement age.
But wait, there’s more. Have you worked enough? In order to be eligible to receive benefits you must have earned 40 credits – translated into English that means you have to have worked for a cumulative 10 years at a job where you were paying into the system. So, that means if you worked 5 years as an employee and 5 years as an independent contractor and have not paid self-employment taxes then you have 20 credits or 5 years towards receiving social security.
You can make up for those 5 years by paying those back taxes. Or you can get employment with a company that will class you as an employee – if you have time. Your ten years needs to be earned before you reach your full retirement age. What is important to know is that income earned as an independent contractor is not calculated into your social security benefits unless you have paid self-employment taxes.
Whatever your age it is good time spent planning how and when you will take your social security benefits.