As many people are
beginning to face retirement, we have started hearing a question more and more
– when should I start receiving social security benefits? As with almost all questions that we receive,
our answer generally is … it depends. Complexity
increases even more as you consider when spouses should start receiving social
security. Some basic steps and principles
can assist with the decision of when to start receiving social security. Usually the best place to start is to find
out how much in benefits you can receive.
Anyone can get an estimate of their benefits at www.ssa.gov/estimator/.
The second step is to
determine the need of receiving social security. In some situations, social security may need
to be taken at age 62 to assist with basic needs. In other situations, people may work well
past 70 and can wait until that age to start.
Reviewing the amount of benefits that can be received along with the
financial needs is a must as it can dictate when to start receiving social
security before even considering the rules and possibilities.
The third step is to
review the rules regarding social security to determine the best age to start
receiving the monthly benefits. The
following are some general rules and guidelines to help you increase your
understanding. However, many times this
choice can be a more complex area in which assistance from a qualified
professional with understanding about social security should be sought after.
An individual generally
can start receiving social security at age 62 and can wait up until age
70. Currently, full retirement age is 66
at which time full benefits are received.
A reduction occurs if receiving benefits before this age (25% reduction
currently). In addition, the individual
who receives benefits before age 66 cannot earn more than $14,640 in a year or
the benefits are further reduced. By
waiting past age 66, retirement benefits can increase by 8% annually up to a
total of 132% if you wait until age 70 to receive benefits.
However, by waiting
longer presumably life is now shorter (stating the obvious), so this is
somewhat of a gamble in choosing when to receive social security. Generally, it will take until about age 77 to
make up on lost benefits if you wait until full retirement age instead of
starting at age 62 with a reduced benefit.
Further, if you wait until age 70 to receive the additional benefits, it
generally takes until about age 81 to reach break-even point compared to
receiving benefits at full retirement age.
Thus comes the question – how long do you think you will live?
Aside from looking into
the future, different options still can help you maximize the amount of
benefits you receive in your life without considering how long you live. This is especially true when considering
social security benefits of spouses. Spouses
can receive half of their partner’s benefit.
A spouse with an earning record requires careful analysis. Depending on whether their own benefit is
greater than the spousal benefit, different options are available to maximize benefits
received.
Considering the
complexity of the rules of social security, as mentioned previously we suggest
that you inquire of a qualified professional regarding which option is best to
maximize social security received during life and meet your financial
needs. We would be happy to discuss your
particular situation and circumstances to help you determine the option that
best suits your needs.
Article by: Bryan Wright, CPA
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