Posted on 08/02/2018 9:22:46 AM PDT by Red Badger
Social Security benefits can be claimed at any point after a recipient turns age 62, and most Americans take their Social Security as soon as they can. Claiming benefits early can be smart, but it can pay off to wait. If you're deciding when to start receiving Social Security, here's what to consider. Estimate your expenses
Retirement usually means a big drop in income, and if you don't have a solid grasp on what your spending is going to look like in retirement, then you won't be able to make the best decision on when to claim.
Depending on who you talk to, experts usually recommend budgeting for 70% to 80% of your pre-retirement income to cover expenses in retirement. However, the exact amount you'll need depends on your specific situation.
According to the Bureau of Labor Statistics (BLS), retirees spend the most money on home mortgages and auto loans, so if those loans won't be paid off when you retire, you'll need to budget accordingly. Overall, the BLS reports that the average 65-plus household spends about $45,221 per year, and housing and transportation account for $15,711 and $6,830 per year, respectively.
Healthcare is another big expense in retirement, and it's usually smart to over-budget when it comes to planning for those expenses. If you're healthy, your costs might not increase significantly at first, but you'll likely require more healthcare as you get older, and that healthcare won't be cheap. Healthcare spending in over-65 households totals $5,877 per year, according to the BLS, including $4,029 for health insurance and another $694 for medicine. Fidelity Investments estimates that a couple retiring at 65 this year will fork out over $275,000 in healthcare expenses during their retirement, and ultimately, the tally could be tens of thousands of dollars higher than that if you need long-term care at some point, too. Social Security options
If you've paid into Social Security over a career lasting at least 10 years, there's a good chance you'll qualify for benefits.
You can claim your benefits when you turn 62, but you'll receive a reduced payment. If you go the claim-early route, apply three months before you turn 62, so that you can receive your first check in the month after you turn 62.
If you want to receive 100% of the benefit you're eligible for, you'll need to wait until you reach your full retirement age to claim. Your full retirement age depends on the year in which you were born, but for people turning 62 in 2018, it is 66 years and 4 months.
Your third option is to wait until after your full retirement age to claim so that you can receive delayed retirement credits. These credits increase your payment for every month beyond your full retirement age that you delay. Overall, delaying increases your benefit by 8% for every year you hold off, until age 70.
The following chart shows how much a Social Security recipient would receive if their full retirement age is 66, their benefit is $1,000, and they chose to claim benefits between age 62 and age 70.
Data source: Author's calculations.
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While this example shows how benefits change depending on when you claim, the exact amount you'll receive in benefits is determined by a complex calculation based on your highest 35 years of earnings.
You can create a login here to view your actual Social Security benefit, but the average monthly Social Security check is $1,404 in 2018, and the average check paid to recipients age 62, age 66, or age 70 last year was $1,112.30, $1,382.78, and $1,510.49, respectively.
Once you know your expected Social Security income at age 62, age 66, and age 70 add to it any other sources of retirement income you'll receive, such as pensions and investment income. If you've thoroughly calculated your projected retirement expenses, then you should be able to use these numbers to determine the age at which you can reasonably expect to afford to retire. Important considerations
If you have ample income in retirement from other sources, it might make the most sense to embrace a claim-early and-invest strategy. As you can see in the following chart, waiting to claim benefits doesn't break even with taking benefits early until you reach your late 70s or early 80s, depending on when you claim. But if you claim benefits early and then invest that income, you could conceivably push that breakeven point back even further, depending on your annual returns.
Data source: Author's calculations.
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It's also important to consider the impact of claiming decisions on your spouse's financial security after your death. If your widow and widower is full retirement age, they can receive 100% of your benefit amount after you pass away, but only up to what you would otherwise be receiving if you were still alive. Therefore, if you claim early and receive a smaller monthly benefit, it may not be enough money for your surviving spouse to maintain his or her lifestyle.
If you're working in a high-paying job (relative to what you earned early on in your career), you might want to delay claiming your benefit anyway. If you've already accumulated a 35-year work history, additional high-earning years will replace lower-earning years in your benefit calculation, thereby giving your full retirement age benefit a boost.
Furthermore, if you plan on working into your early 60s, then you should know that if your income exceeds limits, the IRS will tax some of your Social Security until you reach your full retirement age. In those cases, delaying when you claim so that you lower your income taxes might be a smart choice.
Overall, when to claim your Social Security benefits is one of the most complex, and important, choices you'll face leading up to retirement, so make sure you understand the various retirement strategies available to you.
The assumption was system solvency. With Trump and his successors in power I have hopes for the system.
I don’t understand the concept of Full Retirement Age. You can start drawing anywhere 62 to 70 with payments going up about 8% a year. Oddly some years seem to go up more and others less. It seems like a way to keep sheeple working longer.
If you live in a state that doesn’t evaluate assets for food stamps, and your other income is low, it may be beneficial to delay payments so you can claim that and other benefits for a while.
If you take it before your full retirement age, it will be permanently reduced. You will be limited in the amount of money you can make to $17,040 (in 2018) without having your benefit withheld. If you plan to work and make more than the limit, reconsider.
If you are at or above your full retirement age, consider your life expectancy. The cross-over point where your total benefits received—lower amount for longer time vs higher amount for shorter time—is about age 81. If, based on life-expectancy, you plan to live longer than age 81, waiting is the way to maximize your benefit.
In any consideration... if you need the money, take it.
Medicare and Social Security are separate programs with separate rules. Generally, you apply for Medicare at 65 without variation and independent of Social Security decisions.
The answer is as early as you can. There is no guarantee of tomorrow.
“If you take SS at FRA (Full Retirement Age) and still work, your SS benefit could be subject up to 85% taxed depending on how much you earn.”
There’s a radio infomercial where the guy is trying to sell retirement planning and says the same thing. He’s doing it to deceive listeners, I suspect you’re just trying to communicate the point...but it comes out meaning something else.
In actuality, your benefit is not taxed at 85% (as implied), but rather 85% of your benefit is subject to federal income tax. So if you get $1000 from SS, you don’t pay $850 in taxes, rather your reported taxable income goes up by $850, and thus you pay maybe $200 in income taxes (if in 22% bracket). Big difference.
It depends on what you are using Social Security for.
If Social Security is to be your primary source of income, take it as early as you can.
If Social Security is to be a backstop, to make sure you never outlive your money, but you are going to be living on accumulated savings or pensions, take it as late as you can.
66 1/2 Nov 2019. Can’t wait.
The one taking at 70 (vs 62) will have missed out on (12 x 8 = ) 96 months of (lower rate) benefits.
That is my plan. I’ll just save it at Money Market rates until I figure out how to invest without risking the principal or paying a great deal for an advisor.
Till then, I’ll hold it in an account that is NOT ATM accessible. I know myself. I don’t want my access to this saved money to be too easy. I need to really think about it before gnawing away at that account. Sort of like keeping a bottle of fine whiskey locked up in my kitchen cabinet, and paying someone to hold the keys.
Maybe, but the system wasn’t in quite the straits it is now back then.
thanx
SSA has it wrong then
https://www.ssa.gov/planners/taxes.html
file a joint return, and you and your spouse have a combined income* that is
between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits.
more than $44,000, up to 85 percent of your benefits may be taxable.
Growing old isn’t so terrible — when you consider the alternative. ......Mark Twain......
No, you don’t have to take it. However if you don’t but need to later and haven’t had coverage that meets certain criteria (what they call credible coverage), there are penalties pertaining to cost. This applies to Part B and the Prescription coverage, whatever letter of the alphabet it is. Part A is free and may be a good way of having additional coverage with any existing external coverage you may have.
Yep. My wife and I did the math before taking hers. And one reason we did it was that if I die before her (statistically probable), hers will be moot anyway because she’ll then get the much larger death benefit instead.
And as we all know, a dollar in the hand today is also worth more than the promise of a dollar in the hand in 15 years.
“You can get help from your state paying your Medicare premiums. In some cases, Medicare Savings Programs may also pay Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance) deductibles, coinsurance, and copayments if you meet certain conditions.”
I’m pretty sure your wife can get 50% of the amount you get. That’s the way it works with us.
” up to 85 percent of your benefits may be taxable”
I think I’m in line with SS on this. They’re saying that if you get $1000, up to $850 could be subject to federal income tax...but NOT that one would pay up to $850 in federal income tax (leaving only $150 post-tax), as implied by many people (both intentionally or not).
There’s also the possibility of going on SNAP benefits to delay having to go on Social Security, often for another year or even two.
bookmark - I did not know that about Part B
62, because there’s no guarantee you’ll make it to 66 or 70.
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