Collect Now, or Later? Timing Your Social Security Benefits
Friday, July 16th, 2010
Collecting Social Security as soon as you are eligible is a tempting proposition – but experts agree you should try to resist if you can.
You can claim Social Security any time from age 62 to 70, but the longer you wait, the larger your monthly check. And many people come out ahead if they wait at least until their full retirement age, which is different from the day you stop working for good. For people born 1943 to 1954, full retirement age is 66.
What do you stand to lose by taking benefits early? Take those who are set to receive $1,000 a month at their full retirement age. If they sign up for benefits at age 62, they will collect only $750. But if they wait until 70, they will earn extra credit and receive up to $1,320 a month – nearly a third more.
At first glance, it seems that everyone should wait until they are 70. But that is not the case. The answer depends on many factors, including when you stop working, how much you have in savings, whether you are healthy, whether you are married or single and whether your spouse earns more – or less. Planners agree that it is smarter to collect earlier if it will prevent you from accumulating debt.
Figuring out when to collect is easier when you do not have to worry about how your actions will affect a spouse. It usually pays to wait until your full retirement age if you can support yourself instead. Though many experts will tell you to delay as long as you can, waiting from 66 until 70 may not be optimal for some singles.
Consider a single person with $200,000 in savings returning 5 percent a year. Instead of taking Social Security at age 62, she withdraws $19,000 annually until she turns 66. Her savings will last until age 94, but she will still have $21,000 a year in Social Security benefits. If she claimed at 62, her savings would run out at age 87 and she would be left with only $16,000 a year in Social Security.
Planning is more complex for married couples because there are age differences, varying retirement dates and earnings and other factors to consider. In many cases, the higher-earning spouse should delay his or her benefits until age 70, while the lower earner begins to collect at age 62. This ensures that the surviving spouse will end up with the maximum amount of benefits for the rest of his or her life.
If you have any questions, or would like to discuss your own options in regards to Social Security, do not hesitate to contact us! Contact the New York office at, (914) 366-4830.