Getting Your Social Security Timing Right

As you move from your 50s into your 60s, you will likely need to make a choice about when to collect Social Security retirement benefits. Many people you know will fall back on the old adage "collect as soon as you can for as long as you can" and grab their benefits at age 62. However, in an age of increasing longevity and disappearing pensions, this may not be the most optimal, or even the most prudent, choice.

Would you prefer $1,500 or $2,640 in monthly income?*

Determining when to collect Social Security benefits is one of the most significant retirement planning decisions you will make. Not only will it define the size of your monthly benefit, but also the amount of Social Security income you collect over your lifetime – proving that time really is money.

In simplest terms, your benefit amounts are based on your Primary Insurance Amount (PIA), the monthly benefit you are eligible to receive at Full Retirement Age. This number is located on page two of your Social Security statement.

The Cost of Collecting Too Early

You may begin collecting Social Security benefits as early as age 62—but with a consequence. Collecting before Full Retirement Age means locking in a permanent reduction. At 62, your benefit would be reduced by 25%, meaning you are only eligible to collect 75% of your PIA (assuming a Full Retirement Age of age 66). This reduction will decrease for each month you wait after age 62, up until Full Retirement Age.

Waiting Can Be Worthwhile

On the other hand, your benefits will increase for every month you wait to begin collecting beyond Full Retirement Age and until age 70. These monthly increases are Delayed Retirement Credits (DRCs), which increase your benefits by 8% of your Primary Insurance Amount annually (assuming you were born in 1943 or later). If you wait until age 70 to collect, your individual benefits would max out at 132% of PIA (assuming a Full Retirement Age of 66). This is the highest your individual benefits will ever get, so there is no reason to wait beyond age 70 to collect your benefits.

Are you married? If so, read Social Security Spousal Benefits: Another Reason to Appreciate Your Spouse and The Importance of Tackling Social Security Together: To Have, to Hold ... and to Collect and talk to your spouse before making your decision.