The Impact Of Your Starting Age On Social Security

By Denise Appleby | February 01, 2012 AAA
The Impact Of Your Starting Age On Social Security

One of the dilemmas faced by individuals who are eligible to receive social security retirement benefits is determining the best age at which to begin receiving such benefits. Generally, the primary objective is to receive the most amounts possible. However, for some, receiving larger payments for each period is a more desirable option. If you are considering claiming social security income, the following are some age-related points for consideration.

See: Maximize Your Social Security Benefits

Waiting Means Larger Payments
While you can start receiving benefits at age 62, your full retirement age is 65 to 67, depending on the year in which you were born. Deferring your benefits past your full retirement age means receiving larger payments, up until age 70 after which deferral has no impact on the amount you will receive. According to the Social Security Administration, starting your benefits at age 62 can reduce your benefit by as much as 30%.

For example, assume that your full retirement age is 66, and if you start then, your monthly benefits would be $1,000. If you start receiving benefits at 62, the amount would be reduced to $750, whereas if you start at age 69 the amount would be $1,240 or $1,320 if you start at age 70. Since electing to receive a reduced benefit at an earlier age would likely be permanent, consider how this would impact your ability to cover your living expenses during retirement. For instance, if you expect to live past age 80 and social security would be your primary source of income, it may make better financial sense to delay receiving your benefits until age 70, and supplement your income from other available sources until then, including continuing to work.

The Effect of Life-Expectancy
Your social security benefits will continue for as long as you live. As such, the total amount you eventually receive generally depends on how long you live after you start receiving benefits. Your health status and the historical life-expectancy of your ancestors can be used as a gauge to determining your life-expectancy. Take your life expectancy into consideration when determining whether it make sense to defer your benefits past your full retirement age, or starting your benefits at age 62. (To learn more, check out 4 Unusual Ways To Boost Social Security Benefits.)

Consider Your Spouse
The age at which you begin to receive benefits can affect the amount your surviving spouse will receive. For instance, if you start receiving benefits before your full retirement age, your surviving spouse would receive a reduced amount. Whereas, if you wait until you reach the full retirement age to begin benefits, your surviving spouse could receive the same amount that you receive, providing that they are of full retirement age.

If your spouse is eligible for social security benefits based on their income, and you are unsure of whether it makes good financial sense to delay beginning your benefits, you might consider having one of you defer receiving benefits past the full retirement age.

The Bottom Line
This is only a high level explanation of some of the factors that could affect the decision about your right age to start your social security benefits. There are other factors to consider based on your personal financial profile. Your health status, life expectancy, the amount of any other sources of income during your retirement years and how long that income will last, are just a few of these factors. If you are unsure of how your choice will impact your finances, consult with your financial advisor. (For more, read 5 Tricks For Stretching Your Social Security Benefits.)

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