Social Security Retirement Benefits: When Should You Start Collecting?


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Attorney Carlon B. Walker offers some options to consider before making this important decision
Author: 
By Carlon B. Walker

When should you start receiving your Social Security retirement benefits? The answer to this question depends not just on your age, but also on your personal circumstances, including your current salary and whether or not you have one.

The earliest retirement age for Social Security retirement benefits is age 62. If you begin receiving your Social Security retirement benefits before your full retirement age (66 if you were born Jan. 2, 1943 through Jan. 1, 1955, or 67 if you were born after 1959), your benefits will be permanently reduced. For example, if you start to receive your Social Security at age 62, your retirement benefit payment would be about 25 percent less than the full retirement benefit you would have received if you had waited until you reached your full retirement age.

Many Baby Boomers (anyone born from 1946 through 1964) have applied for their reduced Social Security retirement benefits instead of waiting for their full retirement benefits at a later age. Is it better to receive Social Security retirement benefits early or late? There isn’t a definitive answer to this question.

Personal circumstances may cause you to decide to receive your Social Security retirement benefits as soon as possible, as opposed to waiting to receive them later. If you need money now because you don’t have a job, your current job doesn’t pay enough to cover your current expenses or you don’t expect to live a long time, you may want to start receiving your Social Security retirement benefits early. On the other hand, even if you don’t have a job, don’t need money now and you expect to live a long time, you could choose to start receiving your Social Security retirement benefits early. In this case, your retirement benefits could be invested, or they could become your current stream of income instead of tapping into your other investments.

However, if you do have a job that pays well and you plan to continue working, you may want to wait until a later time to receive your Social Security retirement benefits. Of course, your annual wages or earnings up to a specified amount ($106,800 for 2011) will be subject to Social Security taxes, but your Social Security retirement payout at an age later than age 62 will be greater. Also, if you start receiving your reduced Social Security retirement benefits before your full retirement age and your earnings exceed a threshold amount (for 2011, $14,160 annually or $1,180 per month), your reduced Social Security retirement benefits will be further reduced. You may keep all of your Social Security retirement benefits regardless of how much you earn if you have attained your Social Security full retirement age. In addition, if your income exceeds certain amounts, your Social Security retirement benefits will be taxed. For example, if you file a joint federal income tax return with your spouse and your combined income is between $32,000 and $44,000, you may have to pay federal income taxes on 50 percent of your Social Security retirement benefits, and if your combined income is more than $44,000, you may have to pay federal income taxes on up to 85 percent of your Social Security retirement benefits.

The Social Security Administration should provide you with a yearly statement showing the earnings or wages on which you paid Social Security taxes and an estimate of retirement benefits you may receive. Your Social Security retirement benefits are based on your lifetime earnings or wages. These lifetime wages or earnings are adjusted to reflect changes in average wages since the year they were received. Your average adjusted monthly earnings are then calculated using your highest 35 years of earnings. A formula is applied to these earnings in order to determine your basic retirement benefit, which is the amount you will receive at your full retirement age. You are eligible to receive full Social Security retirement benefits at your full retirement age as shown below:

 
 
If You Were Born In
Your Full Retirement Age for Full Social Security Benefits Is
1943-1954
66
1955
66 and 2 months
1956
66 and 4 months
1957
66 and 6 months
1958
66 and 8 months
1959
66 and 10 months
1960 and After
67
 
 
Your decision to begin receiving your Social Security retirement benefits at age 62 or at a later age is a personal decision. After you have decided when you wish to retire, you should contact the Social Security Administration for assistance. You can apply for your Social Security retirement benefits online at www.socialsecurity.gov, apply in person at any Social Security office, or call the Social Security toll-free number, 1 (800) 772-1213.
 
In addition to Social Security retirement benefits, because you and your employer paid Medicare taxes on all of your wages, you will become eligible to receive Medicare health-care benefits at age 65. Medicare was provided in the 1960s to address the concern that no mandated government program existed to provide health insurance for the elderly. Medicare taxes fund the basic health insurance program for workers who reach age 65. In general, you should apply for your Medicare health care benefits three months before you reach the age of 65 to avoid higher premiums for your Medicare medical insurance regardless of when you decide to start collecting your Social Security retirement benefits.
 
Carlon B. Walker is an attorney licensed to practice law in Michigan and Illinois. In his private practice, located in Chicago, he provides legal advice and counsel with respect to tax, employee benefits, and estate planning.The information contained in this article, however, is for informational purposes only and should not be construed as legal advice.
 
 
Recommended Resources
 
 
United States Social Security Administration
This government publication provides contact information and explains Social Security retirement benefits and what you need to know when you are eligible for your retirement benefits.
 
By Bernan Press.
This book provides information about Social Security programs and services and identifies rights and obligations under the Social Security laws. It also contains official data collected and compiled from the Social Security Administration about Social Security benefit programs. It was published privately to fill the void created when the Administration discontinued its own print version.
 
By J L Matthews & Dorothy Matthews Berman, (2013 edition).
This book is intended to help you get all the Social Security benefits, including retirement benefits, which you are entitled to receive. It uses plain language to explain rules and regulations.
 
By V R Leonard
This book provides an overview of the Social Security and Medicare system, how Social Security benefits are computed and how to file a claim. The book also explains Social Security retirement and auxiliary benefits, survivor benefits and disability benefits and protection.
 
 

 

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