When Should I Begin Social Security?

There is no perfect answer, but you can learn the rules and how they apply to you.

by Daryl Dagit, Savant Capital Management

Social Security is designed to supplement your pension and personal savings in retirement, and there are many theories regarding the best time to start drawing your benefits. There is no perfect answer unless you know your date of death, but you can become informed about the rules and how they best apply to your personal decision. Here are some ideas to help you decide what is best for you and your family, as every situation is different. You must look at all the various claiming strategies and see which one yields the best outcome over your lifetime, considering life expectancy, inflation and any special circumstances.

You basically have three options for starting your Social Security benefits: early retirement age, full retirement age (FRA), and delayed retirement age. Let’s look at these three options:

Early Retirement Age
You can start drawing your Social Security benefits at age 62. But, depending on when you were born, taking this option will reduce the amount you would receive compared to full retirement age by up to 30 percent. For example, according to SSA.gov, a person born in 1960 or later who qualifies for $1,000 at FRA would have their benefit reduced to $700 by claiming at age 62. Their spouse would qualify for a minimum of $500 (half the primary earner) at FRA, but taking benefits early would reduce this benefit by 35 percent to $325.

Full Retirement Age
Depending on your date of birth, your FRA will vary. You can find your FRA by going to SSA.gov. By delaying your benefits to FRA, you will be eligible for delayed retirement credits. Your break-even in total benefits paid out between the early strategy and FRA is normally between ages 72 and 78—meaning you would need to live to that age to break even in benefits received. Living past this age will allow you to collect more total benefits over time. 

Delayed Retirement Age
Delaying your benefits beyond FRA (up to age 70), will increase your benefits. Waiting until age 70 will result in a break-even age of 80 to 82. The delayed credit is eight percent per year for individuals born after 1943. If your spouse is much younger, this strategy could give them the most benefits over time, especially if their life expectancy is greater than yours. Keep in mind the surviving spouse will receive the higher of the two benefits at the death of the first spouse. 

Also to consider: If you are still employed prior to FRA, make sure your earnings stay below $18,960 to avoid paying $1 in tax for every $2 you earn above $18,960. If you are a joint filer, your Social Security is taxed up to 50 percent between $32,000 and $44,000 of income, and up to 85 percent of your Social Security earnings are taxed if your income is over $44,000. Finally, if you decide to delay your retirement, be sure to sign up for just Medicare at age 65.

A lot of money can be lost by starting your benefits at age 62. Look at all the options and determine which strategy is best for you. For assistance, consult with a qualified financial advisor. Visit SSA.gov for a copy of your benefit statement. PM

This is intended for educational purposes only and should not be construed as personalized financial advice. Please consult your financial professional regarding your unique situation. 

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