Social Security Benefits Flow Chart:

Flow Chart: The illustration below is a rudimentary "Flow Chart" of the current options available to an eligible Social Security ("S.S.") recipient and its potential impact on a spouse and/or dependents.

Important Consideration: Many financial advisors suggest that retirees will need anywhere from 70% to 80% of pre-retirement income to afford a comfortable retirement life-style. S.S. benefits currently replace only about 40% of pre-retirement income for the average worker. More than a third of retirees (35%) receive 90% or more of their income as a monthly payment from the Social Security Administration. As a consequence, many retirees will need to work well into retirement to afford a dignified retirement life-style.

This is why it is important to have pensions, savings and retirement investments to supplement Social Security benefits.

Color-Coded and Numbered Chart: The boxes on the illustration below are color-coded and numbered for easy reference.

  1. Yellow Boxes: Those boxes in “yellow” represent rudimentary information and options available to the primary “Record holder” regarding eligibility, application and simple options available for retirement benefits.

  2. Blue Boxes: Those boxes in “blue” represent benefits of the current spouse, window(er), and ex-spouse of the primary “Record holder” designated as “Record holder (1)” on the chart.

  3. Green Box: The “green” box represents benefits to which the family of the current Record holder may be entitled.

Key Decision Points: The follow represents key decision points an eligible Social Security recipient should consider prior to election of Social Security benefits.

  1. Decision Point 1: The first decision point for the beneficiary is the choice of primary retirement benefit options (Boxes “4”, “5” & “6”).

  2. Decision Point 2: Is whether or not you want to keep working in retirement. If you elect early retirement there are income limits which may reduce your monthly Social Security retirement benefits (Box “10”).

  3. Decision Point 3: Is in reference to election of retirement benefits by the spouse who is eligible to independently receive retirement benefits based upon his/her own work history (“Record holder 2”). If a spouse has accrued enough credits to be eligible for retirement benefits, independent of Record holder (1), the spouse has a series of options related to the election and timing of spousal benefits and/or benefits the spouse may be entitled to as a Record holder (designated as “Record holder (2)”). (Check with Social Security to determine what is the optimal strategy for your particular situation is.)

Maze content: If you are unable to see all of the content for each box in the Social Security maze, try adjusting the zoom of the page going to your browser menu and selecting a larger zoom setting. You can also hold down the control (ctrl) key and use the scroll bar on your mouse to easily adjust the zoom setting.

Managing the Social Security Retirement Benefit Maze: An Illustrative Flow Chart of Benefit Options
Start Here
(1) Record Holder 1 Retirement Benefits
Benefit Payments based on earnings over working career
(20) Family Benefits
1. Spouse less than 62 taking care of child under 16, or disabled
2. Children up to 18, 19 if in high school
3. Disabled children if older than 18
(Maximum family benefits 150-180% of Record Holder 1)
(2) S.S. Eligibility
40 Quarters (10 years) Income Paid into Soc Sec if born 1929 or later
(13) Widowed
Receive benefits at 60, or 50 if disabled. Can take reduced benefits on Record Holder 1 and switch to full benefits at FRA based on own record. (Rules vary; contact Social Security)
(14) Not Worked
Eligible for half of Record Holder 1 Benefits at FRA. Benefits reduced if elect early retirement (see box 19 below)
(12) Spouse
(15) Worked - Record Holder 2
(16) Divorced
Get Social Security benefits if marriage lasted 10 years, 62 or older and unmarried. Ex-spose benefits do not impact Record Holder 1 benefits or current spouse. If Record Holder 1 and Ex-spouse are both 62, Ex-spouse can receive benefits even if Record Holder 1 is not retired
(3) Apply for Benefits
3 months before you want benefits to start
Decision 1: Choice Retirement Benefit Alternative
(17) Eligible for Spousal as Well as own Benefits (Record Holder 2)
Record Holder 1 benefits will be paid first and if Record Holder 1 spousal benefits are higher than own, Record Holder 1 will receive a combination equaling the higher spouse benefits (Reduced benefits for early retirement)
Decision 3: Spousal Retirement Electives
(4) Early Retirement
Age 62 (Benefits typically 25% lower than Full Retirement)
(5) Full Retirement (B)
Note: Social Security only replaces 40% of pre-retire income
Birth Year FRA
1943-54 66
1955 66+2Mos
1956 66+4Mos
1957 66+6Mos
1958 66+8Mos
1959 66+10Mos
1960+ 67
(6) Delay Retirement Benefits (C)
Even if you delay Social Security benefits, still sign up for Medicare
(18) At FRA Spouse May Elect to Receive Spousal Benefits and Delay Record Holder 2 Benefits
Under this option, a spouse may choose to receive only spousal benefits and continue to accrue credits on own record (Record Holder 2) and file for benefits based on effect of delayed retirement benefits (contact Social Security for details)
(7) Working in Retirement (D)
Higher lifetime earnings may result in higher retirement benefits
(8) Delay in Receiving Benefits (E)
Not working but delay receiving benefits beyond your FRA. This will increase your benefits when you choose to receive them later or at age 70. (Ex: If born 1943 or later, each year delay adds 8% to benefits)
(19) Reduced Benefits Upon Early Retirement
Full_Retire Early_Retire Percent of Full_Benefits
65 62 37.5%
66 62 35.0%
67 62 32.5%
Benefits increase at later ages up to a maximum of 50% at FRA
Decision 2: Continue working?
(9) Working in Retirement (F)
You can continue to work and still receive retirement benefits with the one difference being Early Retirement beneficiaries may be subject to reduced benefits based on income limits. Social Security benefits may be taxable*
(10) Benefit Limitations (G)
Early Retirement Benefits Income Limits:
1. Prior to Full Retirement Year: $1 benefits reduced for each $2 over annual limit ($15,120 for 2013)
2. Year Reach Full Retirement: $1 benefit reduction for each $3 over annual limit ($40,080 in 2013)
3. On and After Month of Full Retirement: No reduction in benefits no matter how much you earn
(11) No Benefit Limitations (H)
Retirement Benefits are not reduced by the amount of Income earned
(11) No Benefit Limitations (H)
Retirement Benefits are not reduced by the amount of Income earned
Note: "FRA" is an abbreviation for "Full Retirement Age"
Sign up for Social Security
Social Security Benefit Taxes: You may pay taxes on up to 50% of your Social Security benefits based on combined income
1. Individual Filing: $25,000 - $34,000 may have to pay up to 50% of Social Security benefits - over $34,000 up to 85%
2. Joint Filing: $32,000 - $44,000 may have to pay up to 50% of Social Security benefits - over $44,000 up to 85%
3. Combined Income: Sum of adjusted gross income plus nontaxable interest plus half of Social Security benefits
This table is provided only as a rudimentary illustration of options available to Social Security beneficiaries and is not to be relied upon when making decision regarding election of Social Security retirement benefits. While due care was taken in the construction of this chart, its accuracy cannot be guaranteed. Consult with representative of Social Security at the contact information provided above prior to making any decisions regarding election of your Social Security retirement benefits.
Social Security Intro Retirement Steps
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