By Ellen Gelfand, CPA

At what age should I start collecting my Social Security benefits?

Social Security BenefitsThat’s probably the main question asked by our clients approaching retirement age. Actually, it’s the second most popular question behind, “Will Social Security be around when I retire?” While I can’t predict the future of Social Security, here’s some information to help you determine the best age to start collecting it.

The short answer to this very complex question is to delay collecting benefits as long as you can – at least until full retirement age, if not beyond. That said, there are number of factors (some listed below) that may influence your decision. Please read on, but it’s best to discuss your needs with a qualified CPA or financial advisor.

The evolution of Social Security benefits

Traditionally, the full Social Security benefit age was 65, with “early retirement” (reduced benefits) available starting at age 62. While the early retirement age hasn’t changed, the full retirement age has been creeping up, and is now somewhere between 66 and 67 for most of us, depending on when we were born. Benefits are reduced by as much as 30% if you start collecting before full retirement, and increase to as much as 132% (that’s a 32% bonus) if you can hold off until age 70. The Social Security website has a retirement age calculator where you view benefit percentages based on your age.

Factors impacting your Social Security benefits decisions

Besides your age, there are a number of factors that impact your benefits along with your decision on when to start collecting them. These include your:

  • Employment and investments. If you’re still working or have other earned income and start taking benefits before your full retirement age, retirement benefits may be reduced until you reach full retirement age. I won’t go into more detail here, as the rules can be pretty complex.
  • Financial need. Do you need the money at age 62, or can you wait a few more years to increase your monthly payments? Don’t sacrifice quality of life today for a little extra money later.
  • Based on your health and your family’s health history, how long do you expect to live? If you plan to live longer than your average life expectancy, postponing the benefit start date gives you a larger monthly check.

What the Social Security Administration has to say

The good folks at the SSA point out that it shouldn’t matter at what age you start taking benefits. Regardless of your age when you begin, the total payout will be the same. That assumes you live to the average age expectancy for a person in your age category. Since none of us know how long we’ll live (hopefully a long and healthy life!), there are advantages to waiting and then taking the largest monthly payment possible.

Before you decide, please consult a trusted advisor

As I mentioned above, every situation is unique. This is essentially a math exercise, and a CPA, financial planner, or tax advisor can help you understand your tax implications and determine the “retirement” age at which your Social Security benefit payments will be optimal. If you’d like to discuss your personal situation, please contact me.