When to Take Social Security - Slimmer Payments

When to Take Social Security

Did you know that the age at which you take your Social Security Benefits will impact your payment amount for your lifetime?

You can start to collect Social Security Insurance (SSI) payments at 65. However, you are much better off waiting to take your benefits until you reach “Full Retirement Age,” or FRA.  FRA is the age at which you may claim full  Social Security benefits. FRA has steadily increased from 62 to 65 to nearly 67, depending on when you were born. This is due in part to improving senior health, as well as an increase in life expectancy.

Those who claim benefits earlier, at say, age 62, will receive a reduced benefit. It may or may not be enough to cover living expenses in retirement. Those who wait to claim benefits until age 70, on the other hand, will receive an increased benefit. It is often worth waiting for. For most retirees, your monthly benefit will increase 8% for every year you delay claiming Social Security beyond your FRA.

Married couples have a number of options

One option is to have the lower-earning spouse claim benefits immediately at 62. The higher-earning spouse would wait until age 70. This allows a steady stream of payments to begin. It also lets the 8% guaranteed annual increase in benefits accrue on the higher earner’s future payouts.

Regardless of when you decide to take it, all financial planners advise that today’s retirees and those of the near future should look at SSI merely as a supplement. It is not nearly enough to rely on for a healthy retirement. Also, by 2035, benefits may need to be reduced. That is the year that it is estimated that Social Security cash reserves are slated to run out.

What happens when Social Security runs out?

To be clear, this doesn’t mean that retirees will stop receiving benefits. What it does mean is that the fund will only pay out as much as it takes in on an annual basis. What that means is that you cannot rely on government-sponsored benefits. It will be largely up to you to save enough via employer retirement plans, IRAs, and brokerage accounts to be able to draw enough to support a financially sound retirement. Claiming SSI retirement benefits in your 60s may very well happen. However, you need to think of those payments as merely a bonus after many years of diligent saving and investing.

Should retirees not have enough savings and other sources of income beyond Social Security benefits, there is the option of earning minimal amounts of money through part-time work to supplement your finances. Remaining active through some form of paid work, assuming you have the appetite for it, is a great way to stay sharp, find additional fulfillment, and reduce the stress on your personal savings.

Retirees in the past could get by with a little more than SSI. This is increasingly becoming more mythology than reality. For this reason, it’s vital to continuously save for retirement on your own and aim for more than you think you need. Claiming Social Security at 65 should be seen as a possible plus but certainly should no longer be the core of anyone’s retirement strategy.

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