You’ve been paying into Social Security for years, and now you’re eligible to apply for benefits. Should you apply to receive your Social Security income immediately? Or should you wait and receive larger payments?
It’s a good question, and the answer depends on a lot of individualized factors. Here are a few:
Look at the whole picture.
Have a clear view of all of your retirement income sources outside of Social Security. Project what you need for retirement, and the kind of lifestyle you wish to maintain during your retirement years, as well as planning for life care. How much will you depend on Social Security for an income source during your retirement years, and how much will other sources of income such as retirement accounts, pensions, stocks and annuities, other income such as rent or an inheritance play into the picture?
How long will you work?
You are eligible to collect benefits as early as age 62. However, if you are working at age 62, your benefit will increase by eight percent for every additional year that you work, up to age 70. So it really may make sense to work longer, or at least to work until you are at full retirement age. Full retirement age refers to the age at which you will receive your Social Security benefits without any deduction, even if you are still working. (To find out when you can receive full benefits, go here.) To understand how Social Security calculates the amount of benefit you will receive even while working, go here.
What happens if you receive benefits early?
Your benefits will be smaller if you opt to receive them earlier. If you begin to receive benefits in 2017 at age 62, the benefit amount will be reduced by 26 percent, according to Social Security rules. Also, benefits to your spouse or children on your record will be reduced as well. The pros of receiving early benefits is that you can’t predict your lifespan, and so some advise that you begin to receive benefits as soon as you are able, or if you are planning to retire early.
What if you wait?
As mentioned above, your benefit will increase by eight percent each year that you delay receiving benefits, up until age 70. So, if you enjoy working and do not need to draw on Social Security right away, or if you have the majority of retirement income in sources other than Social Security, your maximum benefit can be 50% higher than if you begin to take Social Security at age 64 (the average age that most people start to take benefits).
This blog covers just a few of the considerations you should take into account when deciding when to begin your Social Security benefits. There is a lot of helpful information online published by the Social Security Administration at: www.socialsecurity.gov/pubs/EN-05-10147.pdf.
For an in-depth analysis of your particular retirement needs and the pros and cons of taking Social Security earlier or later, contact a Richard Brothers financial advisor today.
Worried about outliving your money? Request a free, 30-minute consultation with Richard Brothers and start planning for retirement.
