When is the right time to start collecting Social Security benefits?

Published: Tuesday, Apr. 1, 2014 - 9:08 am
Last Modified: Thursday, Apr. 3, 2014 - 6:31 pm

With 58 million Americans currently receiving Social Security benefits in one form or another and five times that number hopeful of joining them one day, there seems to be two overriding questions about the program:

Will it be there when I am eligible for benefits?

When should I start taking Social Security?

There’s no easy answer to either question, but let’s start with what’s known about the first one.

Social Security originated in 1935 as a benefits program to financially assist those in retirement, but now also includes such wide-ranging programs as Medicare and Social Security Disability Insurance (SSDI).

Social Security public affairs specialist Deogracias Santos explains that “Social Security taxes collected from today’s workers pay the benefits of today’s retirees. The current payout of Social Security benefits in excess of taxes will not have any impact on Social Security benefit payments for many years.

“Current trust fund reserves, along with future taxes, are expected to be sufficient for the full and timely payment of benefits until 2033.”

At the same time, the Social Security and Medicare Boards of Trustees notes that under current conditions SSDI will run out of money in 2016, while Medicare’s projected date of depletion is 2026.

Most politicians and financial people believe that’s not going to happen and that eventually legislation will be passed to rectify the situation. But there most likely will be changes, either in the tax rate or the age of eligibility or both.

In its annual report, the Social Security trustees say that “lawmakers should address the financial challenges facing Social Security and Medicare as soon as possible. Taking action sooner rather than later will leave more options and more time available to phase in changes so that the public has adequate time to prepare.”

The question of when to start taking your benefits is a lot less black and white. While most financial planners recommend delaying taking it as long as possible, many workers are excited about the chances of finally getting an early and regular monthly paycheck from the government as soon as possible.

Clearly the longer an individual can delay taking benefits, the more money he or she will receive. In a perfect world, you want to be able to make your decision on when to start receiving benefits based on what you have put away for retirement and what other sources of income you will have, such as a pension.

Here’s an example that financial experts like to use. Suppose you are age 62 and qualify to get $1,200 a month. If you wait until age 66, that will rise to about $1,600 a month, an increase of 33 percent. And if you wait until age 70, you’ll be able to draw slightly more than $2,100 a month.

Financial experts also note that if you plan to claim benefits based on your spouse’s earnings, you’ll lose even more by not waiting until you are 66. There are many, many factors to consider and it makes a lot sense to sit down with an expert and carefully plan well before you begin to take your benefits.

Social Security officials say that “since every applicant’s situation is different, the best filing date varies as well.” The online Benefits Planner at SSA.gov contains a retirement planner, disability planner and survivors planner. Each has valuable information about these benefits and factors that can affect them.

A final note on this: While you can start getting Social Security benefits at age 62, Medicare doesn’t kick in until age 65 so you might have to pay for private health insurance if you retire early on Social Security.

Here are some other interesting questions and answers from the Social Security Administration:

How many beneficiaries are in California and Sacramento?

There are 5,280,104 California beneficiaries and 216,920 beneficiaries in Sacramento County.

What’s the biggest misconception about Social Security?

One common misconception is that filing an application is a lengthy process. Applying for retirement benefits takes as little as 15 minutes and can be done at a convenient time from the comfort of your home or office. Applying for Medicare takes only about 10 minutes.

The Retirement Estimator allows people to get an immediate and personalized estimate of their future retirement benefits based on their actual Social Security earnings record. The online statement provides safe and convenient access to earnings and benefit information. Workers age 18 and older can get their Social Security Statements online by creating “My Social Security” account which can be done in a few minutes.

How far in advance can I sign up for Social Security benefits?

You can apply for Social Security retirement benefits when you are at least 61 years and 9 months of age and want your benefits to start when you hit age 62. Even if you are not ready to retire, you still should sign up for Medicare three months before your 65th birthday.

What is the most I can currently get from Social Security?

The maximum benefit obviously depends on the age you retire. For example, if you retired at your full retirement age in 2013, your maximum benefit would be $2,533. But if you retired at age 62 in 2013, your maximum benefit would be $1,923. If you retired at age 70 in 2013, your maximum benefit would be $3,350.

How old do I have to be to receive full retirement benefits?

Full retirement age (FRA) was 65 for many years. However, beginning with people born in 1938 or later, that age gradually increases until it reaches 67 for people born after 1959. You should go to the Social Security’s website – SSA.gov – and click on “Retirement Age” to find your full retirement age and the percentage of reduction if you want to start benefits prior to FRA.

How much can my spouse receive?

Now it’s starting to get a bit trickier. A spouse receives one-half of the retired worker’s full benefit unless the spouse begins collecting benefits before full retirement age. If the spouse begins collecting benefits before full retirement age, the amount of the spouse’s benefit is reduced by a percentage based on the number of months before he/she reaches full retirement age, the government says.

For example, if the spouse begins collecting a year before the full retirement age, at age 65, the benefit amount would be about 46 percent of the retired worker's full benefit and at age 62, it would be 35 percent.

However, the government says that if a spouse is taking care of a child who is either under age 16 or disabled and receives Social Security benefits, a spouse will get full benefits, regardless of age.

Do I have to pay federal income tax on Social Security?

You have to pay taxes on your Social Security benefits if you file as an individual and your total income is more than $25,000. And you have to pay taxes if you and your spouse have more than $32,000 in total income.

You can use the Internal Revenue Service Notice 703 shown on the back of the Social Security Benefit Statement, SSA Form 1099, to determine if any of your benefits may be taxable.

Read more articles by Jack Sirard

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