Why Wait to Take My Social Security Benefits?
By Paul Hynes, CFP®
(This is Part 1 of a series on timing the start of your Social Security benefits.)
You’ve reached your 62nd birthday. Congratulations! You’re now eligible to begin taking Social Security benefits. But wait—should you? Even though you’ve been paying into the system your entire working career, there may be good reason to delay taking benefits. For others, delaying doesn’t make as much sense.
So, the question is, “Why wait?”
For starters, even if you are turning 62 in 2019, that is not your Full Retirement Age, or “FRA.” For those reaching 62 this year, the FRA is 66 years and six months. The FRA is gradually shifting to age 67 for those born in 1960 or later. Why is this important? Because you may receive a higher monthly benefit if you wait until you reach your FRA, vs. start at age 62. Note: You should check the Social Security website to confirm your own full retirement age.
If your FRA is 67 and you decide to take your benefits at age 62, then your monthly benefit amount is 30% less than if you wait until age 67. For example, if your benefit at full retirement would be $1,500 per month, it will be reduced to $1,050 at age 62. And, other than the annual cost of living adjustment, if there is one, that benefit reduction is permanent.
Okay, so you’ve decided to delay until you reach full retirement age. But, wait! There’s also a credit for delaying your benefits even further. For each year after your FRA that you delay, your monthly benefit will increase by 8%. If your FRA is age 67 and you wait one year, starting your benefits at age 68, your monthly benefit amount will increase by 8%. If you wait until age 69, the benefit goes up by 16%. At age 70, it goes up by 24%. After that, no further increase is applied. Note that these increases are permanent.
Another reason to wait is if you are still working and expect to earn more than $17,640 during 2019. That is the wage limit for early retirees. For each $2 earned over the limit, your benefits are reduced by $1. However, the reductions aren’t a total loss. They are added to your earnings record for benefit calculations in the future. It’s a small consolation, so most people will wait until they stop working to claim their benefits, or wait until a later age.
As you can see, Social Security rules can be complex and often confusing. You can learn more by visiting the website at www.ssa.gov. And, talk with us. We can help you evaluate some of the more opportune times to start your benefits.
Next time we’ll answer the question, “Why take my Social Security benefits early?”