SS+D FINANCIAL NEWS AND INFORMATION

June 25, 2010

SOCIAL SECURITY BENEFITS - WHEN TO START

You can start taking social security benefits at age 62, or you can wait until your full retirement age.  The best time to begin claiming benefits depends on: (a) whether you are still working; (b) your life expectancy; and, (c) your marital status.

Full social security retirement age is 66 for those born between 1943 and 1954.  If you begin taking benefits at age 62 your monthly payments will be permanently reduced by 25% from the amount you would receive if you wait until age 66.  If you delay claiming benefits until age 70 your payments will increase by 32%.

These reductions or increases are meant to equalize the total lifetime benefits based on average life expectancies.  In other words, a person who starts social security benefits at age 62 will receive the same relative amount over his expected lifetime as a person who waits until age 66.  Those who claim benefits early receive smaller payments over a longer time period.  Those who wait will receive larger payments over a shorter period of time.

You can continue to work and still get social security benefits.  If you begin social security at age 62 you can earn as much as $14,160 per year without a reduction in your benefits.  If you wait until your full retirement age of 66 or later, there is no limit on how much you can earn.

The decision on when to take social security benefits should be based on two goals: (1) maximizing the current or present value of the benefits; and, (2) minimizing the risk of out-living your savings.

You should consider starting benefits at age 62 if:

1) You are single and continue to work, you have an average life expectancy, and you have limited earned income.  Social security benefits will supplement your income.

or

2) You are single or married and have significant health issues that will likely shorten your life expectancy.  Taking social security early will maximize the total amount of benefits you will receive.

or

3) You are married and continue to work, and you have limited earned income that is less than your spouse.  This will supplement your earned income and not affect the spousal benefit or the survivor benefit you receive through your spouse.

You should consider starting benefits at age 66 if:

1) You are single or married and you will continue to work, you have an average life expectancy, and you need the added cash flow.

You should consider starting benefits at age 70 if:

1) You will continue to work until age 70, you are single or married with a long life-expectancy, and you want to minimize the risk of outliving your savings.  Your benefit payments will be higher, allowing your savings to last longer.

or

2) You will continue to work until age 70, you are married, and you will have higher benefit payments than your spouse.  Because retiring later increases your payments, your spouse’s spousal and survivor benefits will be higher.

Do you want to know more?  Visit http://www.ssa.gov/