When should you start collecting Social Security?

by Justin Weinger on May 15, 2013

Social Security has been around for quite a few years and is relied upon by millions of retired people as either one of their sources of income or their sole source of income. The amount of money that a person receives from Social Security is based on the earnings that they made during their entire working life and thus the more that you earned while you are working the larger your benefits will be.

That being said, there are also a number of factors besides how long you worked that will affect the amount of Social Security that you will collect every month. One of the most important is when you begin to start collecting your payments. Although seemingly simple the fact is that your Social Security payments could change drastically depending on when you start collecting them and for how long. With that in mind we put together a blog that will help you to decide what’s best in your particular case and will allow you to collect as much as you can from Social Security. The way we see it, you worked hard all your life and you deserve to get as much as possible back from Uncle Sam. Enjoy.

When it comes to Social Security there are two ages that are most important to keep in mind. The first is that 62 years old is the earliest age at which you can start receiving Social Security benefits. The second is what they call the full retirement age or FRA. This age will change depending on the year you were born but is basically the age at which your full Social Security benefits will be paid. If you were born before 1938 the FRA is 65 and this age will gradually increase depending on the year that you were born up until 1943. If you were born between 1943 and 1954 the FRA is age 66 and again gradually increases until 1959. For those born in 1960 or later the FRA is 67.

While the total lifetime benefits that you have earned will not very greatly if you choose to retire and start collecting benefits at 62 or if you choose to retire at your specific FRA there is still the fact that, at 62, your payouts will be reduced. It is thus recommended that, if possible, you wait until your specific FRA date to start getting payments so that you will receive the full amount. Another aspect that needs to be considered is that of spousal benefits because, as women generally tend to live longer than men, collecting Social Security at a later date will mean that your surviving spouse will receive more money after you’re gone. (Your mileage may vary on this one.)

Another very important aspect of Social Security is called Delayed Retirement Credit. What this means is that, if and when possible, you can hold off on collecting your Social Security benefits beyond your FRA you will actually allow your benefits to accrue interest, in some cases equaling hundreds of dollars a month in extra benefits. For example, if you were born in 1943 you will receive an increase of 8% on whatever your total benefits would be for every year that you don’t collect Social Security. This varies depending on the year you were born so be sure to check with Social Security if you’re keen on determining how it will affect your benefits. Keep in mind that after the age of 70 delayed retirement credit will no longer increase your benefits.

What this leaves you with is basically three options;

  1. Receive reduced Social Security benefits at the age of 62.
  2. Receive full and unreduced benefits at your specific FRA.
  3. Receive increased benefits by using delayed retirement credit any time after your specific FRA and up to the age of 70 years old.

One of the most important factors in the choice you make is going to be your life expectancy and whether you expect to reach it or not. Depending on your age and your health you may wish to start collecting as much as you can as soon as possible or, on the other hand, you may wish to delay payments and increase the total amount that you and your spouse will receive.

Single people that plan to work beyond their FRA probably have the easiest decision as waiting until after they reach this specific point in time will mean that they receive the most benefits.  No matter who you are or what your retirement plans are talking to a retirement planning professional is probably a good idea.

Hopefully this little blog has opened your eyes to a number of ideas and possibilities about the Social Security benefits that you are going to receive. We hope you enjoyed it and that you’ll come back and visit us again soon for more excellent financial advice on a wide variety of topics. See you then.

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