by Rodney Brooks
One of the most important decisions you can make going into retirement is when to take Social Security.
That’s why it’s so important to study and prepare – and not wait until you are facing a deadline to make your decision. Study your options when you are still in your 50s. And get some professional advice.
Many financial professionals recommend that their clients wait until age 70 to begin receiving benefits, mostly because they will then get the maximum benefit allowable.
Still, many people take it earlier – at age 62. But keep this in mind. If you wait until age 70, your benefits will increase by 8% each year until age 70. Many people start taking social security payments earlier because they need it. But others take it for more emotional reasons – they paid into it and they want to get every dime out of it. And if you wait until age 70, how long will it take to break even – make up for the payments you haven’t taken since you were eligible?
The average American receives $1,340 a month in benefits, the Social Security Administration says.
There is a lot to consider when making a decision. Longevity should be one of the major considerations. Many people are routinely living well into their 80s and 90s these days. So starting to take the benefit early could mean short-changing yourself for years to come.
For most people, there’s no turning back after you make the decision to take benefits early. You’ll live with that decision for life, and it will also likely affect your spouse’s benefits.
On the other hand, some take it early not because they need it, but they figure they can do better if they invest the money on their own. It may also make sense for some people with health issues, or with families with histories that don’t include longevity.
Again, it can be a difficult and complicated decision for many. Here are some key ages and numbers to consider, all from socialsecurity.gov.
- 62: This is the earliest age you can claim Social Security benefits, and the age at which most people take it. Two thirds of Americans take their benefits as soon as they are eligible. You can choose to receive benefits any time after age 62. But you lock in benefits at roughly 25 percent less than if you waited until 66.
- 66: This is considered full retirement age, but it varies, depending on the year in which you were born. Sixty-six is the age for people born between 1943 and 1954. After that it slowly goes up to 67 (check the SSA website, socialsecurity.gov). Only 14 percent of men and 10 percent of women wait until 66, according to the SSA.
- 70: This is the age in which a worker gets the maximum benefits allowed. It is also the age many financial professionals suggest their clients start taking Social Security. By waiting until then, your benefits would increase by approximately 8 percent a year between ages 66 and 70, There is no financial incentive to wait longer than age 70. Only one to two percent of Americans wait until 70, and they are usually in the higher income group, according to the SSA.
Although the SSA website, socialsecurity.gov, is an excellent source of information, and is really a good way to check on your benefits and even to apply for benefits, it will not advise you on the best claiming strategy for you and your situation.
However, if you are seeking more information, here is a list of some of the better resources we have found for consumers:
- Get what’s yours: The ‘Revised’ Secrets to Maxing out your Social Security, by Laurence J. Kotlikoff, Philip Moeller and Paul Solman, Simon and Shuster, 371 pp., $12.35 Amazon, $11.99 Kindle edition.
This New York Times bestseller was updated in 2016 with the new rules, especially the abolition of the “file and suspend” strategy popular with high-income couples by Congress. As its popularity indicates, this book is an easy read and an excellent guide to Social Security. And it answers evry question you could possibly have about Social Security. Some especially insightful chapters: Be careful taking Social Security’s Advice and Help, and Three General Rules to Maximize Your Lifetime Benefits.
- The Complete Idiot’s Guide to Social Security and Medicare, 3rd Edition 3rd Edition, Lita Epstein, MBA, paperback, $8.
How will the economy affect Social Security? How will new legislation affect Medicare? These and many other urgent questions are addressed in the third edition of The Complete Idiot’s Guide to Social Security and Medicare. This guide incorporates the latest information on these key programs. It looks at how they work, how they are changing, and what the future holds.
- Social Security for Dummies, hardback, second edition, Jonathan Peterson, AARP, $39.99, paperback, 10.55, Kindle edition, $10.02.
Highlights: Easy explanations of Social Security’s complex rules; How to use Social Security calculators and statements; Advice on when to start collecting retirement benefits; Ways to keep your Social Security number safe from theft; How to help a loved one apply for and manage benefits; When and how to handle benefit mistakes and disputes; Myths about Social Security
- The Social Security Claiming Guide, A guide to the most important financial decision you’ll likely make, 2016 edition, $1.50, By Steven Sass, Alicia H. Munnell, and Andrew Eschtruth, Center for Retirement Research at Boston College.
If you’re approaching retirement, when you claim benefits is the most important financial decision you’ll likely make. The Social Security Claiming Guide sorts through all the options, spells out how much you can get, and answers frequently asked questions — all in a clear, easy-to-read, and colorful format. The companion brochure offers highlights of the Claiming Guide.
- Maximizing your Social Security Retirement Benefits, Mary Beth Franklin, contributing editor, Investment News, $29.95. Also available as PDF download at InvestmentNews online.
- Guide to Social Security, 44th edition, Donna A. Clements, B.A. Manager, Social Security Information Services Mercer, 400 West Market Street, Suite 700 Louisville, Kentucky 40202-3346. www.imercer.com/socialsecurity. Free.
The dream of a financially secure retirement starts with knowing what benefits Social Security will provide — over 50% of many retirees’ income. The “2016 Guide to Social Security” is the perfect resource to give out to explain Social Security and how to get the most out of these benefits.
Available at Socialsecurity.gov
- What You Need To Know When You Get Retirement or Survivors Benefits, available in audio or PDF, under retirement publications, March 2016. Find out what you can expect from Social Security, what your reporting responsibilities are and how to report changes that could affect benefits.
- Benefits for Children, available in audio or PDF, under retirement publications, March 2016. Many children are eligible for benefits because one or both of their parents are disabled, retired or deceased.
- How Work Affects Your Benefits, available in audio or PDF, under retirement publications, Jan. 2016. Find out how working after beginning to receive retirement benefits can lead to increases or decreases in benefits.
- Your Retirement Benefit: How It Is Figured, available in audio or PDF, under retirement publications, Jan. 2016. Learn about the formula used to calculate Social Security retirement benefits and take advantage of a worksheet to help you estimate your retirement benefits.