Did you know that, circumstances permitting, when the time comes to start receiving Social Security, you have a choice between collecting your full benefits, less than your full benefits, or 124% of your full benefits?
Collecting an extra 24% can be of great value in retirement -- and it's extra valuable because cost-of-living adjustments made in most years will be increasing a benefit that you've maximized. That means each increase will be bigger than it would have been, too.
Image source: Getty Images.
Here's a look at how to squeeze that extra 24% out of Social Security.
Your full retirement age
Social Security beneficiaries have a full retirement age -- the age at which they can start collecting the full benefits to which they are entitled, based on the record of their earnings during their working life. For most people, that full retirement age is 66, 67, or somewhere in between.
You don't have to start collecting your benefits at that age, though. You can start collecting as early as age 62 and as late as age 70. Start early, and the benefits shrink, start late and the benefits get bigger. (Remember, though, starting early means you'll collect many more checks than someone who starts late. Starting early isn't as harmful as it may seem.)
The table below shows what percentage of your full benefits you'll receive, depending on when you start collecting:
|
Start Collecting at: |
Full retirement age of 66 |
Full retirement age of 67 |
|---|---|---|
|
62 |
75% |
70% |
|
63 |
80% |
75% |
|
64 |
86.7% |
80% |
|
65 |
93.3% |
86.7% |
|
66 |
100% |
93.3% |
|
67 |
108% |
100% |
|
68 |
116% |
108% |
|
69 |
124% |
116% |
|
70 |
132% |
124% |
Data source: Social Security Administration.
When it's best to delay
If you can keep working until age 70 and you want to keep working until age 70, then delaying is a no-brainer. If you retire a bit earlier than 70 but you can tap other resources (such as retirement accounts) for income for a few years until age 70 or close to it, that may make it possible to delay collecting your benefits, too.
If you stand a good chance of living longer than average, delaying is a smart move. That's because the total benefits you'll receive from Social Security will be roughly the same no matter when you start collecting if you live an average-length life. That's how the system is designed.
It might also be smart to delay until age 70 if you're married and you're the one who has earned the most over your working life. That's because when person dies, the survivor will get to collect only one benefit. So if you've maximized your bigger benefit, your spouse will get to collect that sum when you pass away.
When it's best to start early
Of course, it can make sense to start early sometimes, too. This can be the case if you stand a decent chance of living a shorter-than-average life. It can be the case if you're the one in a married couple who has the smaller earnings history -- by starting early, you can generate some income for your household while your higher-earning spouse delays starting to collect their benefit. It can also make sense to start collecting early if you simply need that income.
Take some time to think about when it might be best for you to start collecting your benefits. And perhaps read up on other ways to maximize those benefits, too.
