When to Access Social Security Benefits

Could delaying your benefits be right for you?

10/21/2014

As the years continue to pass, you may find yourself thinking more and more about retirement. One factor that plays a significant role in your retirement is your social security benefits. Many people are debating whether to take their Social Security as soon as they’re eligible or wait a little longer. It’s a question that has no right answer, but here are some tips to consider to help make the right decision for you.
 
Your life earnings determine Social Security benefits; if your earnings are higher, then your benefits will be as well, and vice versa. Typically, age 62 is the earliest that you can access your benefits; however, these benefits will be less if you don’t wait until full retirement age (FRA) when full benefits are paid. Full retirement age varies depending on when you were born: 
  • Born 1937 or earlier – FRA is 65
  • Born between 1938-1942 – FRA is between 65 and two months to 65 and 10 months
  • Born between 1943-1954 – FRA is 66
  • Born between 1955-1959 – FRA is between 66 and two months to 66 and 10 months
  • Born 1960 and later – FRA is 67 
According to Ray Martin of CBSNews.com, there are many factors to take into consideration when deciding what time is the right time to take your Social Security benefits, such as: 
  • Life expectancy – Depending on your health and other factors, if you don’t expect to reach average life expectancy, choosing to delay your access to benefits could mean reduced lifetime benefits.
  • Individual benefits – If you’re single and intend to work after FRA, you should consider waiting to increase your benefits.
  • Spousal benefits – If you expect your spouse to outlive you, it may be wise to have them delay claiming their benefits to avoid a reduction in monthly payments.
  • Increase benefits by working beyond FRA – If you work after your FRA, you can increase your benefits by adding years of earnings and by using a Delayed Retirement Credit (a percentage increase in retirement benefits for every year after FRA that benefits are not taken). 
David Blanchett, head of retirement research for the Morningstar Investment Management Division, notes that the decision on when to take Social Security is different for everyone, according to an article by Rodney Brooks in USA Today.
 
While Social Security plays a major role in an individual’s post-retirement finances, not nearly enough people give it the necessary amount of thought when devising their retirement plan. Brooks offers some Social Security facts that provide some food for thought for your financial planning: 
  • Approximately 41 percent of people take their Social Security at age 62, when it is first available; however, they often wind up losing out in the grand scheme of things as people who are able to wait until closer to age 70 will be able to get approximately 30 percent more. The number of individuals who can financially wait this long, however, is small.
  • Fifty percent of Americans who are 65 years of age and older rely on Social Security for half of their household income; 23 percent rely on Social Security for nearly all of their family income, according to the AARP Public Policy Institute.
  • According to Greg Koenig, director of economic security at the AARP Public Policy Institute, minorities are less likely to receive benefits; those who do are far more likely to be more dependent on them. 

Many financial advisers encourage postponing Social Security benefits as long as possible, at least until your full retirement age as determined by the Social Security Administration, or SSA.
  
Brent Neiser, a Certified Financial Planner, notes that "Social Security is like longevity insurance…It's a stream of payments that will not stop throughout your life, so delaying your benefits to keep those payments as large as possible forms a helpful base to your retirement plan."

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