When Do I Start My Social Security Benefits?

How and when you start to use your Social Security benefits can pose some risks. Getty Images
How and when you start to use your Social Security benefits can pose some risks. Getty Images

Content provided courtesy of USAA.

Timing makes a significant difference in the amount of benefits retirees are eligible to collect.

The telemarketing call that took you away from the stove caused you to burn dinner. The few minutes it took to find your keys this morning turned your quick commute into a glacial journey behind a convoy of buses destined to stop on each corner.

Timing matters in life.

Starting Early

Full retirement age, or FRA, is 67 for anyone born in 1960 or later, but you can start retirement benefits as early as age 62 if you're OK with a smaller check — as much as 30% smaller, depending on how far before your FRA you start collecting.

So, is starting early the right move? It depends.

On one hand, starting as early as possible could mean receiving up to five years of benefits before FRA. According to Social Security*, the average retirement benefit is $1,285 per month. Assume an annual 2% cost-of-living adjustment, and the early starter could pocket as much as $80,000 by not waiting (five years of benefits). But, their total lifetime benefit could actually end up being less.

If they wait until FRA instead, it will typically take eight to 10 years of receiving the larger monthly payments to break even. After that break-even point, the scales tip in favor of waiting.

Still, various situations may call for taking benefits early:

  • You stop working before you hit FRA and need income, but can't go back to work.
  • You're a single person in poor health and see the break-even years as hard to overcome.
  • Your primary goal is to preserve assets for kids or grandkids; Social Security benefits could protect transferable assets.
  • You're concerned about the financial viability of the Social Security program.

Worth the Wait

Like fine wine, Social Security payments get better with time. By delaying, you'll be rewarded with as much as an additional 8% increase per year up to age 70. That's a big deal.

For example, the Social Security Administration Quick Calculator shows that a worker retiring in 2015 at 62 with $60,000 in earnings would receive $1,155 per month. Waiting until 66 pushes the benefit to an inflation adjusted $1,794 per month, and waiting until age 70 increases it to $2,840. That means if the worker lives to 90, he or she will get an additional $150,000 in lifetime benefits by waiting until FRA, or about $340,000 by delaying until 70.

If longevity is in the cards, delaying benefits likely makes sense.

Other Factors

Additionally, if a worker elects to begin benefits before FRA and continues to work, Social Security imposes an earnings limitation. That causes the worker to temporarily forfeit $1 of benefits for every $2 earned over $15,720 (in 2015). Work after FRA does not negatively affect benefits.

Strategies for Couples

If you're married, Social Security opportunities and considerations expand. To maximize your benefits, you'll likely want to spend some time planning your approach.

*Social Security Monthly Statistical Snapshot, February 2015

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