By Max Leifer, Esq.
Determining when to collect social security benefits depends on many individual factors. The correct answer is your individual circumstances. If you were born between 1943 and 1954, your normal retirement age is 66. If you start receiving benefits at age 66, you are entitled to a full benefit as reflected on your earnings record.
You can start your social security retirement benefits as early as age 62, but the benefit amount you will earn will be less than your full retirement benefits (If you are found disabled, you and your family will receive full benefits). Therefore, it is important to check your earnings records with social security at ssa.gov. According to social security, if you retire before 66, the benefits are reduced: 62 is 25%; 63 is 20%; 64 is 13.3% and at 65 is 6.7%. If you receive benefits at 62 and you were born in 1960 or later, the reduction would be 30%.
Obviously, it benefits you to wait as long as you can before receiving benefits. Unfortunately, if you die before receiving benefits, there is no carry over to your family. Benefits are based upon the needs of a living person. Therefore, there is always the risk of an untimely demise.
If you plan to continue working after you become eligible for social security, you’re likely better off delaying benefits as least until you reach your normal retirement age. If you start any time before the year in which you reach your normal retirement age, your benefits will be reduced by $1.00 for every $2.00 you earn above a certain thresh hold ($15,720 in 2015).
After you reach your normal retirement age, you can continue working without reducing your social security benefits except if your income exceeds certain limits, in which case a portion of you social security benefits will be taxable.
After determining your entitlement to benefits, the right choice depends on various factors, including your actuarial life expectancy, your health and your family history.
Loophole to be Terminated: As of April 2016, the Government will be ending an existing loophole in deferred benefit receipt. At this time, married couples can defer one of the spouses’ benefits until they reach 70 years of age or over and the deferred benefits would increase about 8% per annum, creating a larger benefit payment. Many married couples have taken advantage of the savings factor. This will come to an end, as indicated. I suggest you speak to your accountant, insurance broker, or make an appointment at your local office. CAVEAT! Many of the representatives at social security are not familiar with this loophole, and it may be necessary to follow up with the local office or ssa.gov.
In the present state of our economy, 8% per annum is an excellent return on your investment.