Social Security presents people with a choice as to when to take Social Security retirement benefits. People can elect to take retirement benefits as early as 62 years old, at full retirement age, or as late as 70.
The drawback to taking retirement benefits as early as 62 is that the monthly benefit you will receive is significantly less than if you had waited until later.
Once you reach full retirement age, you are then entitled to your full benefit. For those who were born in 1937 or earlier, the full retirement age was 65. For individuals born from 1938 through 1959, there is an increasing scale that pushes back your full retirement age between 65 and 67 depending on which year you were born. For those born in 1960 or later, your full retirement age is 67.
The third option to maximize your monthly benefit is to wait until the age of 70 to start receiving benefits. However, choosing this option means you forego all the monthly payments you would have received between the time of your full retirement age and when you reach 70 years old.
Taking benefits early at the age of 62 should only be used as a last resort since your monthly benefit would only be 70-78 percent of what it would be if you had waited until full retirement age. If you are a married, sole wage earner taking benefits early also reduces your spouse’s Social Security benefits.
The problem with waiting until you are 70 to receive retirement benefits is that in order to come out ahead versus taking benefits at your full retirement age, you would have to out live your actuarial life expectancy. While people don’t like to think they will die sooner rather than later, actuarial life expectancy generally does reflect realistic outcomes, i.e. a person is generally more likely to die before the break even point than they are to outlive the break even point.
The best bet, therefore, is to start receiving Social Security benefits once you reach full retirement age.
For a more detailed analysis of your specific situation and how your Social Security benefits fit into your larger planning needs, please call Martha C. Brown & Associates at (314) 962-0186.
