Should I collect early Social Security?

By Steven Merkel AAA
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

RELATED FAQS

  1. How do Pay As You Go pension plans work?

    Learn how pay-as-you-go pension plans are different than fully funded pension plans and why some government plans are running ...
  2. What's the difference between a financial advisor and a financial planner?

    Seeking professional advice from a financial advisor may involve asking for financial help from a certified financial planner, ...
  3. What are the main differences between Social Security Benefits & Social Security ...

    Read this article to learn about the differences between SSDI and SSI benefits, including qualifications, program funding, ...
  4. What does "full retirement age" mean in regards to Social Security?

    Learn what full retirement age is and how Social Security benefits are calculated based on your age, how long you have worked ...
RELATED TERMS
  1. Variable Annuitization

    An annuity option in which the amount of income payments received ...
  2. To Fund

    A type of target-date retirement fund whose asset allocation ...
  3. Through Fund

    A type of target-date retirement fund whose asset allocation ...
  4. Leveraged Benefits

    The use – by a business owner or professional practitioner – ...
  5. Drawdown Percentage

    The portion of a retirement account that a retiree withdraws ...
  6. Peri-Retirement

    A term for the period of time leading up to actual retirement. ...
Related Articles
  1. Whether you're a saver or a financial advisor who want to give their clients a leg up, these 8 tips are essential for financial planning.
    Investing Basics

    8 Essential Tips For Retirement Saving

  2. The Medicare Part D donut hole can confound the best of us. Here's what financial advisors and their clients should know.
    Investing Basics

    'Donut Hole' Essentials For The Financial ...

  3. How can investors close to retirement protect the purchasing power of their savings? Here are some tips for near-retirees and their financial advisors.
    Investing News

    Tips To Beat Inflation For Near-Retireees

  4. Financial advisors can help clients manage longevity risk with a variety of strategies and products. Here's a look.
    Investing Basics

    How Advisors Can Help Address Longevity ...

  5. Investing has its ups and downs, but financial advisers can do much to prepare their clients and their clients' portfolios for such volatility.
    Investing Basics

    How Advisors Can Help Clients Stomach ...

Trading Center