Should I Take Early or Delayed Social Security?

Use these links to jump to different sections:

• How Are Social Security Retirement Benefits Calculated?
• What Age Should a Retiree Take Their Benefit?
• Spouses Can Benefit From the Other’s Benefit

Retirees have options when it comes to when they want to retire and begin to take their social security retirement benefits. It is important they understand these options and the effect it will have on their retirement planning. Retirees can take benefits anywhere from age 62 to age 70. Specifically, the options are:

• Early retirement at age 62
• full retirement at age 66 or 67
• delayed retirement up until age 70

The range in the amount of monthly benefit will vary widely depending on when the benefit is taken.

How Are Social Security Retirement Benefits Calculated?

Retirees who have worked for 10 or more years have gained eligibility for social security retirement benefits. The monthly benefit amount they receive once retired will be based on their lifetime earnings and work record—the higher the earnings, the higher the benefit amount. To calculate their benefit, the Social Security Administration (SSA) looks at the retiree’s 35 highest earning years. Those earnings are indexed or adjusted to account for changes in average wages and cost of living adjustments. A benefit calculator uses a formula that is applied to arrive at a bottom line benefit amount.

What Age Should a Retiree Take Their Benefit?

The SSA indicates that a rule of thumb on when to take the claim benefit is: If a senior needs the social security benefit money, take social security; but if a senior can afford to wait to claim social security, take it later. The Social Security Administration claims that the total amount of benefits a retiree will receive should work out about the same monthly payment regardless of whether they take the social security early or late. Factors to weigh in determining when to take the benefit include:

• Current health and life expectancy of the retiree
• Retiree’s family health history
• Personal finances and retirement income of the retiree
• Marriage status of retiree

Retirees who begin receiving early social security retirement benefits—for someone turning 62 in 2018—will receive a benefit reduced 26.7 percent from the full retirement age benefit. The amount of the reduction decreases each month the senior gets closer to full retirement age. Retirees will receive their full benefit amount if they retire and apply for social security at their normal retirement age. Under the current law, full retirement age for anyone born in 1960 or later is 67 years old. For those born before 1960, the full retirement age occurs sometime during their 66th year. People can also choose to work beyond their full retirement age and delay taking their benefit. This can benefit the person in two ways:

• An extra year of earnings may increase their monthly benefit amount and add to retirement savings
• Receive delayed retirement credits for each year delayed beyond full retirement age

If retirement is delayed until age 70, the retiree can expect an increase of around 30 percent of their full retirement monthly benefit amount. Delayed retirement credits end at age 70, so there is likely no incentive to delay beyond then. If a full retirement benefit amount is $1,000, taken at age 66 or 67, an early or delayed benefit amount will be:

• $733 monthly benefit amount if take at age 62
• $1,300 monthly benefit amount if take at age 70

Delaying retirement the full eight years beyond early retirement at age 62 amounts to a benefit amount nearly double the early retirement benefit.

Spouses Can Benefit From the Other’s Benefit

Spouses may earn their own benefit or, if their earnings are much lower, can choose to take a benefit amount equal to 50 percent of the higher earning spouse. This also applies to divorced spouses who were married for at least 10 years. The benefit to the divorced spouse will not affect the amount to the recipient or their spouse. If the higher earning spouse passes away, a surviving spouse will receive 100 percent of the benefit amount of the deceased spouse. That amount depends on whether the deceased spouse has retired early or delayed retirement. This also applies for a divorced surviving spouse; they will also receive their qualified benefit amount once their ex-spouse passes. The SSA cautions that social security retirement is only one part of a proper retirement plan, which should also include income from pensions or retirement accounts, savings, and potentially part-time employment. To determine the best time to apply for social security retirement, those nearing retirement should contact an experienced Texas elder law attorney who can work with your financial planner and make sure you receive higher benefits. For more information on this area, see our overview of elder law and estate planning.