If you’re approaching retirement age and will qualify for social security, you’ll need to decide when to start collecting. You can begin as early as age 62 or as late as age 70. Within that window, your monthly receipts will increase for each month you delay taking benefits.
Here are three items to consider when choosing your starting date.
- Your “full retirement age” (FRA).
- Whether you plan to work until you reach FRA.
- The availability of other retirement resources, such as pensions and investments.
Your FRA will be between 66 and 67, depending on your birth year. If you were born in 1960 or later, your full retirement age is 67. For each year before 1960, the retirement age decreases by two months. For example, if you were born in 1958, your FRA is 66 years and eight months.
If you take benefits before reaching FRA, your payments will be reduced based on how early you start. The maximum reduction is 25% if your FRA is 66, and 30% if your FRA is older than 66.
Your benefits may also be reduced if you plan to continue working after you start receiving social security. Until you reach FRA, your benefits will be reduced by $1 for every $2 you earn above an annual limit ($15,720 in 2015). Once you reach FRA, however, the limit on earnings no longer applies.
What if you receive a pension or investment income and decide to delay receiving social security benefits? Your monthly payment will increase for each month you delay benefits beyond your FRA. The increases stop when you reach age 70, so there is no reason to postpone taking benefits beyond that point.
Other factors, such as your spouse’s participation, may affect your planning. We urge you to contact us for help integrating social security into your retirement plan.