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Every worker begins at some point to think about retirement and apply for social security benefits. The big question is: when should you start collecting Social Security?
In general, the key to this answer is what is considered the "retirement age" because it is the age at which you can receive your full benefit. But the answer is not the same for everyone.
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Deciding when to start collecting Social Security is a personal decision that should be based on your personal and family circumstances.
Previously, you could retire early by receiving reduced benefits from age 62 or waiting for 65 years. But now, depending on your year of birth, you will not reach retirement age before age 65. 67.
What is the age of retirement in 2019?
Today, the retirement age is 67 for those born in 1960 or later. If you were born in 1937 or earlier, your retirement age is 65. The FRA increases each year thereafter until it reaches its ceiling at 67 years of age.
You even have the option to defer your benefits beyond your retirement age, allowing you to get an even higher monthly check. If you plan to work during your retirement, you may want to delay the social security contribution because your earnings may have a negative effect on your benefits.
However, in some cases, receiving benefits before reaching retirement age will probably pay off.
If you start collecting as early as possible, at age 62, you will receive a reduced benefit permanently, but you could do better if you live long enough to offset the reduction. If you wait until the retirement age, you can collect 100% of your benefits.
Here's what to consider when determining when to start collecting Social Security benefits.
When should I start collecting social security benefits?
Optimal strategy: put it off. As a general rule, it is best to defer social security benefits until at least you reach the retirement age, which is determined by the Social Security Administration.
The early collection of social security will cost you
If your retirement age is 67, your social security benefit is reduced by:
- About 30% if you start collecting at age 62.
- About 25 percent if you start collecting at 63.
- About 20% if you start collecting at age 64.
- About 13.3% if you start collecting at age 65.
- About 6.7% if you start collecting at 66 years old.
Source: Social Security Administration
"Social security is like life insurance," says Brent Neiser, a Certified Financial Planner and Senior Director of the National Endowment for Financial Education. "It's a flow of payments that will not stop throughout your life, so delaying the payment of your benefits so that these payments are as large as possible forms a useful foundation for your retirement plan."
Neiser urges those who have not saved enough for their retirement to use every means possible to defer their social security benefits until they reach retirement age in order to increase their future income.
For example, if your retirement age is 66 and you delay social security to 67, you will receive 108% of your monthly benefit. If you wait until the age of 70, it goes to 132%.
"You can use your personal savings to reduce the gap, but you should ideally consider working a little longer (and delay social security)," says Neiser.
Another advantage of working longer? Medicare. Aging Americans become eligible for federal health insurance coverage at the age of 65.
"If you stop working at 62 and you lose your health insurance, you have to take out additional insurance to bridge the gap until you reach the age of 65 and Medicare starts your career." Neiser explains.
If you plan to work during retirement, you have another incentive to delay the social security contribution. Earning too much money at a job after starting to collect social security can have a negative effect on your benefits.
If you have reached the retirement age at the end of the year, the government deducts $ 1 of your benefits for every $ 2 you earn beyond the annual income limit. For 2019, the revenue ceiling is $ 17,640.
In the year in which you reach the retirement age, your benefit is reduced by $ 1 for every $ 3 earned above $ 46,920 (in 2019) up to the month where you reach the age of retirement.
You will also have to pay social security and health insurance taxes on your earnings, even if you are already receiving benefits.
Early benefits can pay off
According to Neiser, there are cases where receiving early benefits is profitable despite the reduced monthly check.
"No one can predict how long you will live, but if you face a potentially significant reduction in your life expectancy and income, taking social security earlier may be appropriate," he says.
Make sure your budget is reduced.
If you are 67 years old and you start collecting social security contributions at age 62, for example, your benefits are reduced by about 30%.
The reduction drops to 25% if you wait 63 years, and so on. The Social Security Administration provides a table of pension benefits by year of birth.
Married women are also good candidates for claiming early benefits because they risk surviving their husbands. These widows then become eligible to receive the highest of their benefits or benefits from their deceased husband.
However, this scenario is only valid if the husband does not apply for benefits earlier. By not claiming early benefits, the husband actually increases the monthly benefits that his wife eventually receives.
What is your break-even point?
Calculate your break-even point to better determine when to start subscribing to Social Security. Your break-even occurs when the total value of the higher benefits (of the retirement deferral) starts to exceed the total value of the lower benefits (of the choice of early retirement).
Here's an example: if you qualify to receive a reduced benefit of $ 900 to age 62 plus one month and your benefit would increase to $ 1,251 at age 65 and 10 months, your estimated break-even point is 75 years and 5 months .
If you plan to live beyond this age, it would be financially profitable to delay benefit payments.
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However, when it comes to calculating a start date for social security benefits, there is no age that suits everyone. Before you call, think about your financial needs, your health, and your post-retirement plans.
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