An early retirement is sweet -- see whether you want Social
Security to help you achieve one, too.
Selena
Maranjian (TMFSelena) Jan 14, 2019 at 8:00PM
When it
comes to planning for retirement, one of the most important decisions we have
to make is when to start collecting our Social Security benefits. I've written
before about how I plan to take Social Security at age 64, but I really want to start
collecting at 62, and I just might do so.
Here's a
quick review of what you need to know before deciding when you want to
start claiming your Social Security, along with some considerations to use in
guiding your thinking process.
What is
my full retirement age?
Everyone
has a full retirement age (FRA) in the eyes of the Social Security
Administration (SSA), based on when you were born. The age at which you start
collecting your retirement benefits will directly determine the amount of your
Social Security checks for life.
This is
the earliest age at which you're eligible to start collecting your full Social
Security benefits. It used to be 65 for everyone but it has been increased for
many of us. For those born in 1937 or earlier, it remains 65; for those
born in 1960 or later, it's 67; and for those born between 1937 and 1960,
it's somewhere in between.
Bigger or
smaller checks?
You can
control the size of your benefit checks by starting to collect your benefits
earlier or later than your full retirement age. Doing so will, respectively,
shrink or swell the amount in your checks for life. The table below shows how
much of your full benefits you'll receive if you start collecting at various
ages:
|
Age You Start Collecting :
|
Full Retirement Age of 66
|
Full Retirement Age of 67
|
|
62
|
75%
|
70%
|
|
63
|
80%
|
75%
|
|
64
|
86.7%
|
80%
|
|
65
|
93.3%
|
86.7%
|
|
66
|
100%
|
93.3%
|
|
67
|
108%
|
100%
|
|
68
|
116%
|
108%
|
|
69
|
124%
|
116%
|
|
70
|
132%
|
124%
|
Source: Social Security Administration.
If your
full retirement age is 67 and you start collecting at 64, your checks will be
for just 80% of the amount had you waited until you were 67. If you instead
wait until 70 to start, your checks can be 124% of what they would be at 67.
This bonus is baked in to incentivize people to delay claiming their benefits
until they're older, if they are able to.
Don't
make the easy mistake of assuming waiting is better: Remember that if you start
early, you'll receive many more checks. And the system is designed to be a wash
for those who live average-length lives. (Of course, if you expect to live well
beyond an average life span, there's more merit to delaying.)
How to
get more in Social Security benefits
There are
other ways you can influence the size of your checks, too. The formula used to
calculate your benefits is based on your earnings (adjusted for inflation) in
the 35 years in which you earned the most money. So if you have worked for 37
years, your two lowest-earning years won't be used in the equation. And if you
have worked for only 31 years, four zeros will be factored into the formula --
meaning that it can be worthwhile to work a few more years, to get as close to
35 as you can. Even if you've worked for 35 years, if you're earning a lot more
today (adjusted for inflation) than you did in the past, each extra year you
work now will kick out a low-earning year from the equation.
Strategizing
with your spouse is important and you should coordinate on who will start
collecting benefits first, and who might delay. It can be smart to have the
higher earner delay starting to collect, to let those checks grow even bigger.
When I'm
collecting Social Security benefits
So, why
would I aim to start collecting at 62? These are my reasons, but think about
whether they might apply to you, as well as guide your own decision-making.
·
I'm impatient. I would rather retire a little early, if I can.
·
I have been saving for retirement for a long time, so I won't have
to rely solely on Social Security. (The average Social Security retirement
check was recently $1,461, or about $17,500 annually, and the maximum check topped out at $3,770, for
around $45,000 annually.)
·
My family's longevity is mixed. Some relatives have lived to 90 or
beyond, while others have died much earlier. Thus, there's a good chance that
delaying starting to collect won't pay off.
I may
still stick with my original plan to start collecting around 64, though. Here
are some reasons:
·
Healthcare expenses can be hefty in retirement, and I can't enroll
in Medicare until age 65. If my spouse keeps working, I could stay on her plan
-- but anyone without a good way to stay covered or pay for significant medical
expenses before Medicare kicks in should rethink retiring early.
·
My spouse isn't likely to retire when I'm 62, so if she keeps
working, I may want to as well. A few years later, we could both retire and
start enjoying lots of free time together.
·
Waiting two more years is more conservative, which will let me
keep saving money, growing my retirement war chest a little bigger, and will
shorten the period of time my savings will have to support me. It will also
allow my Social Security benefits grow bigger -- to 80% of my full benefits
instead of 70%.
Each
person's situation and considerations are different, so learn all you can about Social Security and
make you own informed decision. There are good cases to be made for
retiring early or for hanging in there, working until age 70. See which
retirement age seems best for you.
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