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Social Security News
When Should You Take Your Social Security Retirement
Benefits?
It is a personal
decision that depends on a number of factors
By
ElderLawAnswers.com
  October
11, 2006 - As you approach retirement, you must decide when to begin
taking your Social Security benefits. You have three options: You may
begin taking benefits between age 62 and your full retirement age, you
can wait until your full retirement age, or you can delay benefits and
take them anytime up until you reach age 70.
More than two-thirds of people take their benefits
early. Some of them don't have a choice -- they need the money right
away. But for others, it might make more sense to delay benefits, even
past their full retirement age. Ultimately it is a personal decision
that depends on whether you plan to keep working, your health and life
expectancy, your spouse's needs, and the availability of other
retirement plans.
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If you were born before 1937, your full retirement
age was 65. For those born after 1937, the retirement age gradually
increases until it reaches age 67 for people born in 1960 or later.
If
you take Social Security between age 62 and your full retirement age,
your benefits will be reduced to account for the longer period you will
be paid. If you delay taking retirement, depending on when you were
born, your benefit will increase by 6 to 8 percent for every year that
you delay, in addition to any cost of living increases.
For example, suppose you are born in 1944 and are
eligible for your full Social Security retirement benefit at age 66, but
delay taking benefits until age 70. Your annual percentage increase in
benefits will be 8 percent.
By delaying your benefits by four years, the
Social Security check you will receive will be 32 percent higher (4
years x 8 percent per year). If your monthly benefit would have been
$1,000 had you taken it at age 66, the monthly benefit you will receive
at age 70 will be $1,320 (not counting cost of living increases, which
are around 4 percent a year).
If you are lucky enough to have the choice of when
to take your benefits, consider the following factors:
● Whether you plan to keep working. If you plan
to work until your full retirement age or beyond, it probably won't make
sense to take benefits early, especially if you earn considerable
income. Any income you earn above Social Security's
income thresholds will be
taxed. So not only will you be receiving reduced Social Security
benefits, but you will pay tax on the income as well, and the extra
income may mean that more of your Social Security benefits will be
taxed.
● Health and life expectancy. To get the full
advantage of delaying benefits until age 70, you will need to live past
age 80 (not taking into account cost of living increases). The average
life expectancy for men who reach 62 years of age is around 80, while
for women it is around 83. You can't predict exactly how long you will
live, but if you are healthy and have a long life expectancy, you may
receive more benefits if you delay.
● Spouse's needs. Another important consideration
is your spouse's needs. An older spouse (and especially if he or she is
the only breadwinner), might want to delay benefits as long as possible
so as to increase the surviving spouse's survivor benefits and provide
additional protection to the surviving spouse.
Note: Even if you delay
taking your benefits past your full retirement age, your spouse can
still take his or her spousal benefits anytime after age 62 (while you
are still alive, your spouse is entitled to one-half of your full
benefit if it would be greater than what he or she would receive from
his or her own earnings).
● Other retirement plans. Experts disagree on
whether it makes sense to take benefits early and defer using other
retirement plans. Some claim that if you are going to get a higher rate
of return on a tax-deferred retirement plan than you would get by
waiting to take Social Security, you should take Social Security early.
On the other hand, other experts argue that letting a retirement account
build up could create greater tax obligations. If your retirement
account and Social Security combine to put you above the income
thresholds, you will have to pay taxes on the Social Security. Delaying
Social Security may reduce the taxes by providing you with more Social
Security income (which is at most 85 percent taxable) and less
retirement-account income (which can be 100 percent taxable).
Editor's Note: ElderLawAnswers.com has a
section that does a very good job of explaining the Social Security
program and helping readers make decisions about their Social Security
benefits.
Click here to this section.
Click
here to the ElderLawAnswers.com home page.
>> For updates on this story -
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