The Social Security Trade-Off Is Settling For Less Early Or More Later

At what age should you begin your Social Security retirement benefits? That’s the question. Since benefits increases the longer you wait, you should consider your present needs, your concern for a legacy to your children, and your longevity to help you decide the matter.

Your working income history determines your Social Security benefit if you start them upon reaching your full retirement age (FRA). That’s age 66 for most soon-to-retire boomers. But you can start as early as age 62 with benefits decreased from your FRA benefits; they’re decreased in direct relation to how much earlier you begin retirement before your FRA would begin.

On the other hand, if you wait to start beyond your FRA, your benefits increase in proportion to how much longer you wait, but there’s no increase in benefits for waiting beyond age 70. Note that these benefit increases for waiting later are apart – in addition to – from any cost of living increases that may take place too.

The social security shows that whatever your FRA benefit is (i.e. what you’ll receive as benefits at age 66 -your FRA), the amount you would get if you retired at the earliest age, i.e. 62, you’d receive approximately 75% of your FRA benefit. Likewise, if you waited to the latest age for increased benefits, i.e. age 70, you would gain about 32% more than your FRA benefit. I remind you that these benefit results are in addition to the continual cost of living increases that SS gives.

*Considerations to making your decision:

Whatever benefits you do receive, though, will stop when you die. And if you die before taking any benefits, all that money is lost to you or any of your heirs. That’s how the government saves on payouts – and emphasizes that clear fact that the government considers your benefits, which you contributed to over the years, as its money and not yours!

Clearly there’s a trade-off between taking a lower monthly benefit early versus a higher monthly benefit later. To determine which to do, you might consider what age you must live to so that the total amount of benefits you receive from an early start would match the total benefits from a later start. That’s your break-even age. Living longer than this favors starting later if its ‘total money collected from benefits’ as the measure of advantage.

But the Social Security agency says, “If you live to the average life expectancy for someone your age, you will receive about the same amount in lifetime benefits no matter whether you choose to start receiving benefits at age 62, at full retirement age, or at age 70 or any age in between.” So you see that the government has planned an approximate equal payout of benefits to you if you manage to live to your statistically projected age at death.

So your decision comes down to one of two considerations. The first is if you’re so short of income that you simply need to begin collecting early, then you have no choice at all; you must start collecting – as many are doing now.

The second is if you have additional income and can afford to forego beginning your Social Security benefits early, then you should try to determine if your natural longevity will take you significantly beyond your remaining life expectancy or significantly less. If it’s not significantly longer, then I’d take it at FRA or earlier. After all, when the benefit money gets into your hands, it then becomes your money so you can do with it – like leave it as a legacy – as you wish.