Are you tired? Tired of the daily grind, the rat race, of getting up every day and putting on a suit (or blouse)? If you’re in your sixties, you’re probably dreaming of retirement.
And retirement means getting checks from the SSA (really from your past self) in the mail. But when should you start? Should you stop working entirely?
Learn about the best age to collect social security and what factors into the decision below.
The Best Age to Collect Social Security: A Disclaimer
Just like investing advice, there’s no one size fits all answer to this question. Some people need to collect sooner and some can hold off living off savings until later.
While reading this article, find the advice that best fits your situation – not the one you wish you were in. That’s the best way to determine your “best age” to collect social security.
A Guide to (Not For) The Ages
The national age of retirement is 66, depending on when you were born. If you’re reading this in 2019, chances are you were born before 1960.
But if you were born in 1961 – then the retirement age is 67. Don’t ask us why – that’s a question for the social security office.
The earlier you cash in on your benefits, the less you’ll receive per month. Think of it as less overall money in the bank – the longer you work – the longer you build up your account.
The differences in when you choose to “cash out” aren’t huge – but they can make a difference when it comes to living expenses. You’re looking at about 150 extra dollars each month, per year you don’t retire.
In a very general sense, that means you may get $2,150 p/m if you start receiving at 62. If you wait till 66 or 67, then you’re looking at a number more like $2,700.
Obviously, this depends on the number of hours you’ve worked in your life and the length of your career.
How are Social Security Benefits Calculated?
Let’s touch on the difference in amounts per person for a moment. The Social Security Administration has a formula that calculates how much of your paycheck (starting with that first minimum wage job) goes into your account.
They’ll take the average index of your monthly earnings and take a percentage of each paycheck, based on their benefits-formula.
Then, when it’s time to access that amount, they’ll consider any cost of living adjustments – which can raise or lower your monthly payout.
Finally, they take into consideration your age and if you’re still working. You are allowed to work and receive benefits, but you’ll reduce the amount per month if you earn more than the SSA says you “should”.
This is called an income cap, or limit. In 2018 it was around $17,040, per person in the household. If you make more than that, the SSA thinks you need less of their help (even though it’s your money!)
For every two dollars you make over the limit, the monthly amount you receive goes down by a dollar. You’re still earning more than you would not working, but it’s a two steps forward, one step back, kind of situation.
The SSA and Assets
If you have a pretty healthy stock portfolio or other retirement benefits from your government job, your monthly amount isn’t reduced.
The SSA doesn’t count pensions or unemployment benefits either – so you’re off the hook there. It only looks at your net earnings, any bonuses, and assorted types of job pay (commissions, PTO).
Calculating Your Best Age for Benefits
Now that you know some more details, let’s talk about how to know when to pull the trigger.
First, you’ll need to take a good look at your finances. Are you making more than the annual limit and can you live on it, happily? Or do you really need that extra two thousand dollars or more a month?
Your expenses are one of the biggest factors in choosing when to pull money out.
Second, consider your lifetime. It’s morose, we know, but how long do you expect to live? If you have a chronic health condition or aren’t well – be honest with yourself about your lifespan. The shorter it is – the sooner you can start collecting.
But if you’re healthy and don’t think you’ll die anytime soon, it’s better to put off collecting that money. If you’re expecting a long life, you need that money to last longer. Stretch it out by not collecting until you truly need it.
Third, look into fees and what you’d miss by claiming late. If you wait until your actual retirement age, how much more can you get? There are penalties for starting to claim your benefits too late.
Usually, people start collecting by age seventy, to make sure they’re not losing any money.
Would that extra $10,000 a year you could get if you waited until 68 make a big difference? Or do you need the cash now? Again – everyone’s situation is different.
The Best Age for You: Only You Know
There’s a reason people hire financial advisors for retirement. This is all very complex. It’s hard to make the right decision for you on your own.
If you need help, we’re here and well-trained. We can help you work through all the information in this article, and give you a more personalized idea of the best age to collect social security.
For most people, it’s better to wait until your full retirement age, but give us a call – we’ll be happy to financially-age you.
Make an appointment by contacting us, with the information here.