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.
________________________________________________________________________
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.
_________________________________________________________________
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.
If you’re at full retirement age you must take Medicare or you will be penalized later for not taking it. Many corporate medical plans (if you continue working) put Medicare as primary insurance and the corporate plan as excess—another inducement to make Medicare a necessity.
Also, if you do not sign up for some form of medicare prescription coverage at 65 you will also be penalized, with higher premiums, when you do purchase prescription coverage.
It's truly a government forced racket.
I’m going to start taking my Social Sec. later this year, a few months after I turn 62. Why? A. Who knows if this manner of individual payout will remain in force for the next few decades? I have heard of pension plans for huge industries such as General Motors. being ‘adjusted’ in spite of what was promised. Sometimes, the pension simply becomes too expensive to maintain. Retirees in Michigan were furious, but there was exactly nothing that could be done about it. The monies really were needed elsewhere. Apparently, it was also legal. I know Social Security is not the same thing as a pension, per se. But it’s similar enough.
B. Due to certain health conditions, I don’t know if I’ll even be around in ten years, let alone able to get out and job hunt. I guess none of us really knows. I don’t have a great amount saved up for retirement. Therefore, I have an attitude of making my present life as comfortable as I can, without going Hog-wild, economically speaking.
Seems like 64 is the spot for me. My full retirement is 66 1/2. I’ve seen too many people put it off, start collecting and die not long after that. Another thing I factor in is advice from my nearly 90 year old neighbor. He tells me that you may think you need a lot of money when you’re in your 60s, but by the time you hit late 70s, you just don’t need much money, you don’t do as much.
Luckily, we're still in relatively good health at 69 and 70. The smaller monthly amounts at age 62 hasn't affect our lifestyle at all.
Everybody's different but I don't understand the rationale for starting to draw it later, when you may not be around.
Between 60 and 70 is when many people start to have health issues and/or die. Most of my high school classmates who have died, have done so in this age decade.
What little extra money you would have received by waiting until later, pales in comparison to getting the money into your hands earlier when you can still spend it. Deciding to draw it at an older age may be too late.
Part of something is always better than all of nothing.
see #21
Yeah, but what you’re paying in arrives at my house every month so thanks for that. It sort of like me paying a crap load of school taxes. My youngest is 43 and NOT going to school. ;-)
I know two retired veterans who still make a good income working and they aren't able to get VA medical care because their income exceeds the VA's guidelines.
I took it at 62 because it worked out better for me to collect for an extra 4 years at a rate similar to the rate you get when you collect at 66. I turned 64 on July 1 and have been enjoying my SS for two years, and still have 2 more years I wouldn’t have had I waited. I wouldn’t really collect all that much more per month if I’d waited til I was 66. My husband is 71 and is a cancer survivor and not as healthy as me, I’m sorry to say, but should he pass away before me, I will drop mine and collect his, which at a lower rate than he collects now will still be more than what I would have collected at my 66 year old rate. So why not collect it for those extra four years?
My generation was saying the same thing in the late 60’s.
I didn’t ask them how much the pay was in 1973..................
If you make over a certain amount I guess they figure that you are “rich” enough to pay for your own health care and shouldn’t “burden” the government with it even though you volunteered to serve. I’m currently at the lowest level available for VA care. Co-pays etc. But the issue is a med I need. I am able to get it through the VA for $11.00 but outside it would be in excess of $1,800. I would not be able to afford it in that case so..............
I’m 30 years away from retirement. I’m expecting that I’ll have only my pension and savings.
I was shooting for 66, but going to do it at 70.
Medicare A comes without charge, so you might as well sign up for it. Medicare B is optional. You are not required to sign up for it, but you should have an alternative available if you don't. The decision depends on your own particular situation. But for every year past 65 that you don't sign up for B, the premium does go up 10% if you eventually jump in.
medicare-ss signups generally unrelated.
https://www.medicare.gov/people-like-me/new-to-medicare/getting-started-with-medicare.html
click thru links to get where you need to get.
Part A is premium free, so no reason not to take when eligible.
I’m 72 and still working. Because they automatically signed me up at 65, I did not know I was in Medicare. Last year my employer offered the Health Savings Account (HSA) which I signed up for. 10 months in they told me that I was inelgible because I was in the Medicare system even though I was on my work healthcare system. I had to repay all the copays and other medical bills that I used the HSA for and then I had to pay the income tax on it to boot. Writing a check for $2K was hard.
Medicare kicks in at 65, so if you start taking SS early, you won’t be getting Medicare. Be aware that if you don’t take Medicare at 65 without jumping through some specific hoops, you incur a lifetime penalty for late enrollment. Go to the SS office a few months before your 65th birthday to make sure you enroll on Medicare on time.
My mom didn’t follow the rules and had to pay extra for part B coverage for approximately 35 years.
Don’t forget that taxes are still withdrawn from ss payments. Some states don’t tax, but Federal and some local taxes come out.
Thanks for the clarification, i.e. the difference between parts A & B. In my mind I always lump them together, which I shouldn’t.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.