If retirement is quickly approaching, you may have a number of big decisions on your hands. Do you work part-time in retirement or sit back and enjoy your free time? Do you stay in your home or downsize? Is now the time to finally take those vacations you’ve been putting off?
One of the biggest decisions you’ll make is when to start Social Security benefits. It’s such an important decision because it has permanent ramifications. Once you start your benefits, there’s no going back to change them.
You have a few options available. You can start benefits as early as age 62. You can wait until your Full Retirement Age, also known as FRA, or you can delay your benefits all the way to age 70. There are pros and cons with each option, so you should consider each carefully.
The earliest age at which you can file for Social Security benefits is age 62. It may be tempting to file as soon as you’re eligible. However, the earlier you take benefits, the less your benefit will actually be.
For instance, if you file at age 62, your benefit could be reduced by as much as 30 percent. The closer you are to your FRA when you file, the less your reduction will be. If your FRA is age 66 and you file at age 65, your benefit is reduced by only 6.7 percent.1
Remember, this is a permanent reduction. Your benefit doesn’t go back up once you hit your FRA. Unless you really need the money, it’s usually not a good idea to file early. You could be leaving a substantial amount of income on the table.
Full Retirement Age
FRA is the age at which you can take benefits without facing a reduction. Your FRA is either your 66th birthday, your 67th birthday or sometime in between. It depends on the year you were born.
If you were born between 1943 and 1954, your FRA is when you turn 66. If you were born in 1960 or later, your FRA is 67. If you were born between 1955 and 1959, your FRA is 66 plus two months for every year after 1954. For example, if you were born in 1956, your FRA is 66 and four months.2
There’s nothing saying you have to take Social Security at your FRA. In fact, you could delay benefits all the way to age 70.
Why would you want to do that? You receive an 8-percent credit on your benefit base for every year you wait after your FRA. If your FRA is age 66 and you wait until age 70, you could permanently increase your annual benefit by a total of 32 percent.3
That increased benefit could help you pay for health care, inflation and other expenses that frequently become challenges in retirement. If you have other sources of income and can afford to wait, you may want to consider doing so.
If you’re not sure which option is right for you, contact us at Gregory Financial. We can help you analyze your options and identify the right choice for you.
This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
15635 – 2016/4/29