According to the Social Security Administration, nearly 58 Million Americans received Social Security benefits in 2013, with a significant percentage relying on those benefits for 90% of their income. Deciding when, and how, to begin taking these benefits can have a great impact on how much you can collect. Bob Wamhoff, president of Wamhoff Financial Planning & Accounting, offers the following information:
1. The age at which you begin taking benefits impacts how much you can receive (source: ssa.gov):
- Age 62: Minimum age for eligibility. Yet because 62 is not full retirement age, your benefits will be reduced a fraction of a percent for each month before your full retirement age.
- Age 66: Full retirement age for those born between 1943 to 1954. You will be eligible for full benefits. (Note: full retirement age increases by two months each year for those born between 1955-1959)
- Age 67: Full retirement age for those born in 1960 or later.
- Age 70: If you can wait to start taking Social Security until age 70, your yearly rate of increase can range anywhere from 5.5% to 8%, depending on your year of birth.
- Once you begin taking benefits, that’s your benefit for life. There are no increases, so decide wisely.
2. What to consider when determining when to begin taking benefits
- Your lifespan: Today’s average life expectancy is 84 for men and 86 for women (according to ssa.gov), yet Wamhoff’s belief is for people to invest like they’re going to live until 95.
- Your overall portfolio and financial plan: Are you in a position to live off your investments for a period of time so as to delay taking Social Security? Does your financial situation require you to take it at a certain age before age 66, or age 70?
3. Are there ways I can maximize my benefits?
- For some households, strategies such as “File and Suspend” can be an option. This allows filing for benefits at 66 but suspends taking benefits, while at the same time allowing the lower wage earning spouse to claim their spouse’s benefit now (roughly half). Both spouses delay taking their own benefits until 70, thus maximizing their benefits.
- In some cases, couples can maximize their benefits by the lower wage earner taking benefits (if needed) at 62, and allowing the higher wage earner to wait until 70 to maximize the higher benefit.
4. Bob’s Tips:
- Know your options.
- Consider how Social Security will impact (or not impact) your overall financial plan.
- Seek the help of a professional.