If your retirement is near, then we are sure you’ll be thinking or confused to start claiming your hard-earned Social Security benefits.
Well, If you want the income to support you and you are at least 62 (which is the minimum age to claim), then you should definitely do it.
However, if you have various other income to aid until you are older, then how can you decide? In that case, here are the top factors you should consider:
How Are Social Security Benefits Calculated?
First thing first, you should know how to calculate your benefits.
Apart from how much you have earned over the years, the size of your monthly Social Security benefit also depends on your date of birth and the age at which you began claiming it—down to the month.
Also Read: Thrift Savings Plan
A person will acquire his/her complete or normal monthly benefit if he or she begins claiming when he/she reaches what Social Security considers his/her full retirement age. To find your full retirement age, see the chart below.
| YEAR OF BIRTH | FULL (NORMAL) RETIREMENT AGE |
| 1937 or earlier | 65 |
| 1938 | 65 and 2 months |
| 1939 | 65 and 4 months |
| 1940 | 65 and 6 months |
| 1941 | 65 and 8 months |
| 1942 | 65 and 10 months |
| 1943–1954 | 66 |
| 1955 | 66 and 2 months |
| 1956 | 66 and 4 months |
| 1957 | 66 and 6 months |
| 1958 | 66 and 8 months |
| 1959 | 66 and 10 months |
| 1960 and later | 67 |
For instance, a person’s full retirement age is 66. And if he or she starts claiming benefits at 66 as well as his or her full monthly benefit is $2,000, then he or she will receive $2,000 per month.
Plus, if he or she starts claiming benefits at the age of 62, i.e. 48 months early, then his or her benefit will be cut down to 75 percent of his/her full monthly benefit, which will be called his/her primary insurance amount. In simpler words, a person will acquire 25 percent less per month & the check will be $1,500.
He or she will also continue to acquire a reduced benefit not just until he/she turns 66 but for the rest of his/her life. Although it can increase a bit over time along with cost-of-living adjustments. One can easily do the math for his or her own situation with the help of the Social Security Administration (SSA) Early or Late Retirement Calculator.
Also Read: Difference between Annual Compensation & Annual Salary
Likely Longevity
A person’s strategy to maximize Social Security retirement benefits entirely depends on the guesses of how long he or she will live.
Now, any of us can die in an accident or acquire a dire diagnosis next week. However, putting aside these unpredictable situations, how long do you think you will live? Here are some more questions you need to answer:
- How are your bp, cholesterol, weight, and any other health markers?
- How long have your parents and relatives lived?
If you predict any of the above-average life expectancies, then you can successfully come out ahead by waiting to claim your benefits. On the other hand, you may want to claim your benefits as soon as you are eligible.
The Social Security website will make your task easier by telling you that, no matter when you start claiming, your lifetime benefits will be the same if you live as long as the average retiree. But a common problem is that most people will not have an average life expectancy, thus everyone ends up with different claiming strategies.
Claiming Spousal Benefits
Being married may further complicate your decision of when to take Social Security due to the program’s spousal benefits. In most cases, some divorcees are even entitled to benefits depending on their ex-spouse’s work record.
And all those spouses who did not work at a paid job or who did not earn enough credits to be eligible for Social Security on their own are qualified to acquire benefits starting at age 62 depending on their spouse’s record.
Talking about claiming benefits on your own record, your spousal benefit will be cut down if you acquire it before reaching full retirement age.
The highest spousal benefit a person can acquire today is half the benefit his or her spouse is entitled to at their full retirement age.
Taxes on Benefits
Your Social Security benefits can be partially taxable if your combined income is more than certain thresholds. No matter how much you earn, the first 15 percent of your benefits are free from any tax.
Also Read: 5 Tax Deductions Every Self-Employee Must Know
We hope this blog helped you to acquire a clear understanding of the importance of social security.