Whether you want to leave work at age 62, 67 or 70, claiming retirement benefits to which you are entitled by federal law is no casual decision. You will want to consider a few key factors before starting the Social Security Planning process. Social Security Planning, in addition to Medicare Planning, Retirement Planning and College Planning are all important aspects to any comprehensive plan.

How long do you think you will live? If you have a feeling you will live into your nineties, for example, it may be better to claim later. If you start receiving Social Security benefits at or after age 67 (Full Retirement Age), your monthly benefit will be larger than if you had claimed at age 62. If you file for benefits at age 67 or later, chances are you probably (a) worked into your mid-sixties, (b) are in fairly good health, and (c) have sizable retirement savings.

If you sense you might not live into your eighties or you need retirement income, then claiming at or close to age 62 might make more sense. If you have an average lifespan, theoretically, you will receive the average amount of lifetime benefits regardless of when you claim them — the choice comes down to more lifetime payments that are smaller, or fewer lifetime payments that are larger.  For the record, Social Security’s actuaries project the average 65-year-old man living 84.3 years and the average 65-year-old woman living 86.6 years. It is important to take all of these factors into consideration when starting your Social Security Planning process.¹

Will you keep working? You might not want to work too much — earning too much income can result in your Social Security being withheld or taxed. Prior to age 66, your benefits may be lessened if your income tops certain limits. If you are between the age of 62 and 65 and receiving Social Security, $1 of your benefits will be withheld for every $2 that you earn above $19,560 (2022).  If you receive Social Security and turn 66 this year, then $1 of your benefits will be withheld for every $3 that you earn above $51,960.²

Social Security income may also be taxed above the program’s “combined income” threshold (combined income = adjusted gross income + non-taxable interest + 50% of Social Security benefits). Single filers who have combined incomes from $25,000 to $34,000 may have to pay federal income tax up to 50% of their Social Security benefits, and that also applies to joint filers with combined incomes of $32,000 to $44,000. Single filers with combined incomes above $34,000 and joint filers whose combined incomes surpass $44,000 may have to pay federal income tax on up to 85% of their Social Security benefits.²

When does your spouse want to file? Timing does matter. For some couples, having the lower-earning spouse collect first may result in greater lifetime benefits for the household.³

Finally, how much in benefits might be coming your way? Visit ssa.gov to find out, and keep in mind that Social Security calculates your monthly benefit using a formula based on your 35 highest-earning years. If you have worked for less than 35 years, Social Security fills in the “blank years” with zeros. If you have, say, just 33 years of work experience, working another couple of years might translate to slightly higher Social Security income.³

Citations
1. ssa.gov/planners/lifeexpectancy.html 7/27/17
2. newsok.com/article/5546356 5/8/17
3. fool.com/retirement/2016/07/16/about-to-take-social-security-read-this-first.aspx 12/15/16