Figuring out when to take your Social Security benefits doesn’t usually come down to a crystal clear decision. There are multiple factors in play that can affect how much you’ll receive over the course of your life. Knowing the different rules can help you make the right call on when to start collecting payments!
5 Features of Social Security That Are Important to Keep in Mind
Should you claim your Social Security benefits ASAP? Or does it make more sense to hold out for another few years? A quick recap of the facts could help you hone in on the best decision. Every situation is unique—make sure you’re considering every possible angle.
- The Retirement Age Is Approaching 67
For individuals born between 1943 and 1954, the full retirement age is 66. But for those born after 1954 and before 1960, the full retirement age increases by two months every year, capping off at age 67 for individuals born in 1960 and later. Knowing whether your “full retirement age” will kick in can help you plan for your benefits.
- There’s an Estimated 30% Reduction for Taking Benefits at Age 62
While you can start taking your Social Security benefits as soon as you turn 62, it won’t be as lucrative as waiting. There’s a reduction in your benefits for taking payments early, and every month short of your full retirement age will have an impact on the amount you receive. The Social Security Administration estimates that you’ll have as much as a 30% reduction in benefits when you begin taking the at age 62.
- You Can Delay Benefits Until Age 70
Just as you have the option to take your benefits prior to your full retirement age, you also have the option to delay taking your benefits past the full retirement age. You can give yourself a benefit increase by roughly 8% by deciding to wait until age 70.
- Collecting the Social Security Survivors Benefit
If your spouse passes away, you may be eligible for Social Security Survivor Benefits. You can start receiving these benefits as early as age 60. However, it’s important to keep in mind that the amount will be reduced if you haven’t yet reached your full retirement age. What’s more, you can’t receive both Survivor Benefits and your own Social Security retirement benefits at the same time. You have the option to switch between, though, which opens up some good retirement strategies.
For example, if you’re 60 and your spouse passes away, you could start collecting Survivor Benefits right away. Then, when you turn 70, you can switch to your own Social Security retirement benefit, since it will have grown with your delayed retirement credits.
- Remember the Taxability of Your Benefit—and Potential Reductions
Did you know that up to 85% of your Social Security benefits could be taxed? This often happens if you’re still working or pulling money from taxable retirement accounts. It definitely pays to plan ahead!
The key is to understand how your benefits and taxability will work before you decide to claim your Social Security benefits. Because if you’re not yet at full retirement age, and you’re still earning wages or business income subject to Social Security tax, taking those benefits early might cause them to be reduced even more.
We Can Help With Retirement Tax Planning
If you really want to set yourself up for success, be sure to look at all of your options. There are plenty of ways to combine your tax planning with your retirement strategy, and our firm is here to help every step of the way. Please don’t hesitate to reach out with any questions—we’re always happy to connect!