Compiled and Edited By David S. Chang
Many people nearing retirement commonly ask “What is the best age to start receiving retirement benefits?” The answer is that there is no one “best age” for everyone and, ultimately, it is your choice. You should make an informed decision about when to apply for benefits based on your individual and family circumstances. We hope the following information will help you understand how Social Security can fit into your retirement decision. Daniel Peters at WealthBridge Inc. states “It is important to make a decision based on quite a few factors. Some are your assets, health, goals, and financial plan. It is personalized decision based on your financial and life situation.”
Your decision is a personal one
Would it be better for you to begin receiving benefits early with a smaller monthly amount or wait for a larger monthly payment later that you may not receive as long? The answer is highly personal and depends on a number of factors, such as your current cash needs, your health and family longevity, whether you plan to work in retirement, whether you have other retirement income sources, your anticipated future financial needs and obligations, and, of course, the amount of your future Social Security benefit. We hope you will weigh all the facts carefully and consider your own circumstances before making the important decision about when to begin receiving Social Security benefits.
Monthly payments differ substantially based on when you start receiving benefits
If you live to the average life expectancy for someone your age, you will receive about the same amount in lifetime benefits no matter whether you choose to start receiving benefits at age 62, full retirement age, age 70 or any age in between. However, monthly benefit amounts can differ substantially based on your retirement age. Basically, you can get lower monthly payments for a longer period of time or higher monthly payments over a shorter period of time. The amount you receive when you first get benefits sets the base for the amount you will receive for the rest of your life, though you do receive annual cost-of-living adjustments and, depending on your work history, may receive higher benefits if you continue to work. The following chart provides an example of how your monthly benefit amount can differ based on the age at which you decide to start receiving benefits.
Let’s say your full retirement age is 66 and your monthly benefit starting at that age is $1,000. If you choose to start getting benefits at age 62, your monthly benefit will be reduced by 25 percent to $750 to account for the longer period of time you receive benefits. This is generally a permanent reduction in your monthly benefit. If you choose to not receive benefits until age 70, you would increase your monthly benefit amount to $1,320. This increase is from delayed retirement credits you get for your decision to postpone receiving benefits past your full retirement age. The benefit amount at age 70 in this example is 32 percent more than you would receive per month if you chose to start getting benefits at full retirement age.
Retirement may be longer than you think
When thinking about retirement, be sure to plan for the long term. Many of us will live much longer than the “average” retiree, and, generally, women tend to live longer than men. About one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95. Social Security benefits, which last as long as you live, provide valuable protection against outliving savings and other sources of retirement income. Again, you will want to choose a retirement age based on your circumstances so you will have sufficient income when you need it.
Your decision could affect your family
Your spouse may be eligible for a benefit based on your work record (spouse benefits are reduced if claimed before the spouse’s full retirement age). If you die before your spouse, he or she may be eligible for a survivor benefit based on your work record, particularly if you have earned more than your spouse over your lifetime. If you begin receiving Social Security benefits early, we cannot pay your surviving spouse a full benefit from your record. Also, if you wait until after the full retirement age to get benefits, your surviving spouse—if he or she is at least full retirement age—generally will receive the same benefit amount that you would have received. Your children also may be eligible for a benefit on your work record if they are under age 18 or if they have a disability that began before age 22. For them to receive benefits, you must be getting benefits, too.
You can keep working
When you reach your full retirement age, you can work and earn as much as you want and still receive your full Social Security benefit payment. If you are younger than full retirement age and if your earnings exceed certain dollar amounts, some of your benefit payments during the year will be withheld. This does not mean you must try to limit your earnings. If we withhold some of your benefits because you continue to work, we will pay you a higher monthly benefit amount when you reach your full retirement age. In other words, if you would like to work and earn more than the exempt amount, you should know that it will not, on average, reduce the total value of lifetime benefits you receive from Social Security—and may actually increase them. Here is how this works: after you reach full retirement age, we will recalculate your benefit amount to give you credit for any months in which you did not receive some benefit because of your earnings. In addition, as long as you continue to work and receive benefits, we will check your record every year to see whether the additional earnings will increase your monthly benefit.
Don’t forget Medicare
If you plan to delay receiving benefits because you are working, you should sign up for Medicare three months before reaching age 65, regardless of when you reach full retirement age. Otherwise, your Medicare medical insurance, as well as prescription drug coverage, could be delayed, and you could be charged higher premiums.
You can estimate benefit amounts and find more information to help you decide when to start receiving retirement benefits by using our Benefits Planners online at www.socialsecurity.gov/planners. You also can use our Retirement Estimator at www.socialsecurity.gov/estimator or create an account and get your Social Security Statement at www.socialsecurity.gov/mystatement. Both provide retirement benefit estimates based on your actual earnings record. When you are ready for benefits, you also can apply online at www.socialsecurity.gov/applyforbenefits. Many people can continue to work and still receive retirement benefits. If you want more information on how earnings affect your retirement benefits, ask for How Work Affects Your Benefits (Publication No. 05-10069), which has current annual and monthly earnings limits. A wealth of other information—including copies of our publications—is available on our website at www.socialsecurity.gov. You also can call our toll-free number, 1-800-772-1213 (for the deaf or hard of hearing, call our TTY number, 1-800-325-0778). We can answer specific questions from 7 a.m. to 7 p.m., Monday through Friday. Generally, you’ll have a shorter wait time if you call during the week after Tuesday. We can provide information by automated phone service 24 hours a day.
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