Social Security Retirement Benefits - When Should I Collect?
When is the best time to collect Social Security Retirement Benefits? Should I collect them at 62? Should I wait until I reach full retirement age? Should I wait until I’m 70? These are the questions that we all will face as we get closer and closer to retirement age.
You can begin taking reduced benefits at age 62. If you were born before 1937, you would receive 80% of your full Social Security retirement benefits. If you were born after 1938, the full retirement age will begin to increase which will cause your benefits at age 62 to decrease even further. For those born between 1943 and 1954, you won’t be eligible for full retirement until you are 66. After 1954, the age you will be able to retire with full benefits will rise in 2 month increments until full retirement age reaches 67 for everyone born in 1960 or later. Sound confusing? It is.
The first thing you need to do is to request an earnings statement from the Social Security Administration. This statement will give you a year by year breakdown of your earnings as well as tell you how you will be able to collect if you retire early, at full retirement age and what you will be able to collect at age 70. It will take about a month or so to get it but once you do you will be able to sit down and do the math. Just remember that whatever payment you decide to collect, other than for cost of living adjustments, it will not change.
To complicate matters even more, there are other factors you need to consider before deciding when the best time to collect is.
If you chose to accept payments early, you will be limited in how much you can make if you decide to continue working up until you reach full retirement age. In 2002, wage earners younger than the current full retirement age of 65 will lose 50 cents in benefits on every $1 they earn over a specific dollar amount ($12,960 in 2007). After reaching full retirement age, you will not lose any of your benefits but they may become subject to taxes depending upon your filing status.
If your spouse hasn’t worked and/or earned much under Social Security and you want to increase your spouse’s benefits, you may want to wait until your full retirement age. When your spouse is ready to retire, he/she will be able to choose between their own record or they can choose to receive half of their spouse’s benefits. In the event of the death of the higher earning spouse, the surviving spouse can claim the deceased’s full benefits.
The Social Security Administration calculates benefits using a complicated algorithm based on life expectancy so if you have a family history of longevity, you might want to consider waiting to collect until you are 70 so you can get the maximum payout.
If you don’t need the money, you may want to consider collecting early and depositing it into a retirement account where you can collect interest.
Whatever you decide to do, think it through thoroughly before you make your final decision on when to collect Social Security Retirement Benefits.
For more information, check out Social Security, Medicare & Government Pensions: Get the Most out of Your Retirement & Medical Benefits
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