A:

The earliest age that you can start receiving social security benefits is age 62. Full retirement was age 65 for many years; however, the administration realized that people were living longer and that the social security program was in threat of running out of funds, so they developed a new schedule for full retirement benefits available at http://www.ssa.gov/. The new schedule is based on your birth year and can extend your full retirement age to 67 if you were born after year 1960.

The Social Security Administration has attempted to make the determination process simple for participants by providing an annual "Social Security Statement." This statement outlines your benefit at age 62 (early retirement) and at full retirement (age 65-67). Let's take a fictional statement which projects that you would receive $1,443 per month at age 62, or you could work until full retirement (age 67) and receive $2,071 per month.

If you elected early retirement, you would receive $1,443 per month ($17,316 annually). You would receive this for five years before you reached age 67, for a total of $86,580 ($17,316 x 5 years). If you waited until age 67 to start collecting, you would receive $2,071 per month ($24,852 annually). If you assume that the social security benefit is spent in full each year (no savings, no interest), then the breakeven point for most participants will be around age 78.

So, if you plan on living past age 78, you'll collect more funds outright from the program by waiting until you reach full retirement age. Unfortunately, no one knows exactly when their ticket gets punched, so you may want to consider taking the early payment if health issues run in your family or you're able to save some of the social security payment each year.

For related reading, take a look at How Much Social Security Will You Get? and Introduction To Social Security.

This question was answered by Steven Merkel

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