Social Security is a program run through the Social Security Administration that pays retired Americans who qualify monthly benefits, and the COLA increase with work history determines just how much.
There are various programs, like SSI, SSDI, and Social Security retirement.
When it comes to retirement, Americans need to meet specific requirements to qualify.
This includes working for a set number of years, collecting enough working credits, and paying Social Security payments out of your working wages.
What you get depends entirely on your specific situation, the age you retire, what you earned during your working years, and other things.
There are some benefits to choosing to retire at the age of 62 instead of waiting longer
According to The Motley Fool, choosing to collect your benefits at the youngest age makes sense for some.
Age matters because the older you are, the bigger your monthly benefit will be.
The same goes for younger filers, and 62 is the youngest age you can file, so it will be the smallest benefit you can get.
On the other side, the latest you can file before your benefits will stop growing is age 70, when your benefits will be the largest.
While everyone would ideally want a larger benefit, it may not be what everyone needs.
There are a few reasons you may want to collect Social Security at a younger age, like 62
A major reason you may want to just start collecting at the age of 62 is to change jobs.
Many Americans settle into the same job for twenty or thirty years, and by the age of 62 they may feel entirely burnt out.
Instead of fully retiring and dipping into your savings while taking a Social Security check, you could get another job.
This way you can stay in the workforce and handle a major pay cut if necessary.
Many people will want to do something more fun or easier, and with that may come a decrease in salary.
You can then earn money and collect benefits at the same time.
If you’re in bad health and feel that your chances of making it to age 70 are slim, you may want to just retire at age 62.
You’ll see less money each month, but when you wait you’re going without for months or years.
Basically, retiring younger gives you benefits for longer, they’re just worth less each month.
If you have any reason to think you aren’t going to live an average, or longer lifespan, then collecting earlier may be what you need.
Finally, some people just did everything right and have such a substantial nest egg they can start retirement earlier.
Some people have savings worth thousands while others have worked hard enough on theirs that it’s worth millions.
If you’re one of those with nest eggs worth millions, you’re better off retiring whenever you want and just enjoying it.
There are other ways to collect Social Security, and divorced spouses may be able to collect off of their ex’s benefits
Many people believe that once they’re divorced, that is the end, but that isn’t always the case when it comes to Social Security benefits.
At the current rate, around 45% of marriages will end in divorce, according to Financial Advisor Mag.
If you were married to your ex spouse for at least ten years, you may be entitled to Social Security benefits based on their record.
You need to meet a few other requirements aside from the ten years of marriage.
This includes being at least 62 years old, not being remarried, and have a primary insurance amount that’s less than one half of your ex’s PIA.
PIA is what anyone who can qualify for Social Security benefits is entitled to at your retirement ages.
This age is 67 for most people.
That means if you qualify for more than your spouse, you’ll have to collect on your own work record.
You may collect these benefits after your divorce if your ex has applied for benefits.
If your ex has not filed, you may still qualify.
This can happen if you meet the criteria and have been divorced for at least two years.
The two years of divorce make you an Independently Entitled Divorced Spouse.
Could the 2023 COLA increase be enough for Social Security retirees? It may not be with inflation
Social Security benefits are adjusted each year by the Administration so that Americans on a fixed income can keep up with inflation.
If you collect benefits, you may see the largest increase in benefits in over 40 years.
In 2022 that boost was 5.9%, considerably large based on history.
Unfortunately, it did not keep up with the rate of inflation and Medicare costs ate a large portion of the difference.
The COLA increase for 2023 may be similar to the increase in 2022 in terms of helping retirees
The same is likely to happen in 2023, despite the boost’s expectation to be much larger.
The inflation rate reached 9.1% in July, meaning the COLA increase for 2023 could be that high depending on how the rest of the year goes, according to The Motley Fool.
While the 9% extra in Social Security checks would be nice, those living on a fixed income should expect everything around them to rise in price.
In one year, the cost of food rose by 10.9%, gas by 44%, and utilities are up by 19%.
The Bureau Labor of Statistics has shared data that determines the budget for a retired American is much lower than a typical American.
Retirees have less to pay for because their children have grown up and moved out.
This means it’s housing, transportation, healthcare, food, and utility bills that eat away at the fixed income of a retired person.
Housing and healthcare both take up more of a retired person’s monthly budget compared to the average, not retired American.
Food is more expensive as well, but the reason is because all the free time retired Americans have in comparison influences them to eat out more often.
Utilities end up working out to be around the same amount for retirees and non-retirees.
Everything has been hit hard by inflation.
It is believed that the 9% projected for the 2023 COLA increase isn’t going to be enough.
Seniors are currently battling the 9% inflation with their 5.9% increases received in 2022.
By the time they get the COLA boost in 2023, they may not be able to afford it then either.
A bigger COLA is what everyone wants regardless. It just may not be as high as what many people need.
President Joe Biden wants to make some major changes to Social Security, and there’s a pretty high chance that will happen
According to The Motley Fool, President Joe Biden has proposed a plan for Social Security, and it’s popular.
One of Biden’s proposals, which isn’t a favorable idea for some, is to tax those with higher incomes.
At the rate Social Security is currently going, Americans would see their benefits slashed by the year 2035.
This means those eligible would only see around 75% of their full benefits.
The solution, according to Biden, is to put the program on a path that would solve the issue.
The only way to really do this is by putting more funding into the program.
To do this, he believes wealthier Americans should pay more taxes.
Right now, Social Security only taxes incomes up to $147,000 per year.
Biden wants that number to go above $400,000 per year.
This would make it so income between $147,000 and $400,000 would not be taxed.
Biden wants other changes as well, including COLA adjustments to be made in a way that benefits retired Americans.
He wants a higher minimum benefit for Social Security as well as a boost for the very elderly.
Right now, the most likely one to happen is regarding taxing incomes of over $400,000.
At the end of it all, the funding is greatly needed in order to keep the Social Security program running.
A survey taken on how Americans feel about taxing the rich came back in favor of the idea.
88% of Democrats and 79% of Republicans supported the idea.
If changes aren’t made now, retirees are going to feel the consequences in about 13 years.
While this solution may not solve the issue of funding entirely, it will put a major dent into it.
New York has third-highest hospital costs in the U.S., and health insurance rates will rise significantly in 2023
Samantha edits our personal finance and consumer news section. Have a question or lead? Send it to [email protected].