Retirement income for many comes from three primary sources: your regular savings, your savings in your retirement account and social security income. Given that you are in your fifties, it may be a good idea to decide when and how you will submit your claim for your income from social security. You will not be eligible to start receiving social security benefits until you reach age 62 (earlier if you are disabled). However, if you start to receive benefit before your full (normal) retirement age, the amount of benefits that you are eligible to receive would be reduced. Your normal retirement age is based on the year in which you were born and ranges from age 65 to 67. The following table shows the amount by which your benefit would be reduced if you start receiving benefits before your full retirement age, using an example of $1,000 monthly social security benefit.

Note: If your birthday is on January 1st, the social security administration figures your benefit as if your birthday was in the previous year.

Full Retirement and Age 62 Benefit By Year Of Birth

Year of Birth 1.
Full (normal) Retirement Age
Months between age 62 and full retirement age 2.
At Age 62 3.
A $1000 retirement benefit would be reduced to
The retirement benefit is reduced by 4.
A $500 spouse\'s benefit would be reduced to
The spouse\'s benefit is reduced by 5.
1937 or earlier
65
36
$800
20.00%
$375
25.00%
1938
65 and 2 months
38
$791
20.83%
$370
25.83%
1939
65 and 4 months
40
$783
21.67%
$366
26.67%
1940
65 and 6 months
42
$775
22.50%
$362
27.50%
1941
65 and 8 months
44
$766
23.33%
$358
28.33%
1942
65 and 10 months
46
$758
24.17%
$354
29.17%
1943-1954
66
48
$750
25.00%
$350
30.00%
1955
66 and 2 months
50
$741
25.83%
$345
30.83%
1956
66 and 4 months
52
$733
26.67%
$341
31.67%
1957
66 and 6 months
54
$725
27.50%
$337
32.50%
1958
66 and 8 months
56
$716
28.33%
$333
33.33%
1959
66 and 10 months
58
$708
29.17%
$329
34.17%
1960 and later
67
60
$700
30.00%
$325
35.00%
  1. If you were born on January 1st, you should refer to the previous year.
  2. If you were born on the 1st of the month, we figure your benefit (and your full retirement age) as if your birthday was in the previous month. If you were born on January 1st, we figure your benefit (and your full retirement age) as if your birthday was in December of the previous year.
  3. You must be at least 62 for the entire month to receive benefits.
  4. Percentages are approximate due to rounding.
  5. The maximum benefit for the spouse is 50% of the benefit the worker would receive at full retirement age. The percentage reduction for the spouse should be applied after the automatic 50% reduction. Percentages are approximate due to rounding.
Table and data taken from ssa.gov
While the payments would be reduced in you start earlier, you will likely receive the same amount that you would receive if you wait until your full retirement age, as your payments would be stretched over a longer period. You also have the option of deferring your benefits past your full retirement age, which would mean that your payment amounts would be larger. When deciding when to start claiming your social security benefits, there are several factors that can be taken into consideration. These include the following:

Your 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.

Your Other Sources of Income
Consider whether you would have sufficient income to cover your living expenses if you decide to defer beginning social security payments past normal retirement age. If you have sufficient income, it may be practical to defer beginning payments as long as possible so as to receive larger payments when you do begin.

Income for Your Spouse
If you are married and you start receiving benefits early, the amount that your spouse would be eligible to receive as your surviving beneficiary would also be reduced.

Your Employment Status
If you are still working when you begin to receive social security income, your benefits may be reduced, depending on your income amount. For instance, if you are below retirement age and still working, the social security administration would deduct $1 for every $2 that you earn above the annual limit of $14,640 (limit for 2012). For the year that you reach full retirement age, $1 would be deducted for every $3 that you earn above the limit of $38,880 for amounts that you earn before you reach full retirement age. There is no limit on your earnings for payments made after you reach full retirement age.

The amount of social security benefits that you actually receive usually depends on how much you have paid into the system. However, the amount may be taxable, depending on your tax filing status and your income received for the year. For instance, if your tax filing status is single, and your income is between $25,000 and $34,000 (between $32,000 and $44,000 for married filing jointly tax status), 50% of your social security income may be taxable. If your income is more than $34,000 ($44,000 for married filing jointly tax status), up to 85% of your social security income may be taxable. Coordinating your social security income payments with your other sources of retirement income can help to reduce any tax impact. For instance, if you have no choice but to start claiming social security benefits early and you need to make withdrawals from your other savings, it may be practical to make those withdrawals from your regular savings, so as not to increase your taxable income for the year.

Next: The Complete Guide To Retirement Planning For 50-Somethings: Retirement Nest Egg »


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