What to consider in making the social security decision

If you’re approaching retirement and are eligible for social security, you have three broad options for drawing your benefits: start early, wait until your “full” retirement age, or hold out a few years longer to qualify for the monthly maximum.

*Early withdrawals. Starting your withdrawals at the earliest allowable date (age 62) may be a good idea if you (a) plan to stop working or cut back to part-time status, and (b) really need the income. Your health is also a consideration, since an early start will maximize your lifetime benefits if your life expectancy is much below eighty.

Selecting early retirement will permanently reduce the amount you receive each month. In addition, until you reach full retirement age, your benefits will be cut by one dollar for every two dollars over $14,640 that you earn (as of 2012). Consequently, if you’re in good health, don’t need the extra income, and/or plan to keep on working, you’re generally better off postponing your benefits until full retirement age or beyond.

*Full retirement age. Full retirement age is 66 for workers born between January 1, 1943, and December 31, 1954. For those born later, the age limit gradually increases to 67.

Once you’ve reached full retirement age, your social security benefits are no longer reduced by any amount of earned income. If you’ve waited to start your benefits, your monthly income will be greater than under early retirement, although less than you’d get by waiting until age seventy.

*Maximum retirement age. If you wait until age 70 to begin drawing social security, your monthly benefits will be maximized for the rest of your life. This option is generally the best choice for people who are in good health and who can afford to wait. The disadvantage is that political factors might cause changes to the program in the interim.

*Other factors. Although the above three ages are the major milestones, the years between are also important, since each year you wait will increase your monthly benefit. If you’re now working for a relatively high income, your overall benefits will increase even more because they’re recomputed annually based on your highest earning years.

Other considerations include your marital status, the relative ages and earnings of each spouse, and expected survivor benefits. The potential variables are too complex to address here, but if you’re interested in planning for your own retirement, just call our office to schedule an appointment.

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