Why early birds get smaller worms

When considering Social Security income, most people think it best to take the income as soon as they are able. In most cases, this would be starting their income at age 62. While this strategy works for some, there are some other options to consider.



You can begin receiving individual Social Security benefits anytime between ages 62 and 70. Your benefit amount will differ, however, based on your full-retirement age. This is based on your year of birth and ranges from age 66 for those born between 1948 and 1954 to age 67 for those born in 1960 or later.

The maximum benefit depends on the age you retire. According to the Social Security Administration’s website (Ssa.gov), if you retire at full-retirement age in 2017, your maximum benefit would be $32,244 per year. However, if you retire at age 62 in 2017, your maximum benefit would be $25,836. If you retire at age 70 in 2017, your maximum benefit would be $42,456.

Taking Social Security Income at 62: If you are eligible for Social Security retirement benefits, you might be able to take income at the earliest age of 62. This will, however, permanently reduce the amount of income you could receive. Those who have family history of shorter life spans and those who need the money as soon as possible may want to elect this option.

Starting your benefits early means any time between age 62 and your full-retirement age. The early retirement reduction at age 62 ranges from 20% to 30% and is based on your birth year. For example, let’s say you were born in 1950, qualify for a monthly benefit of $1,000 at age 66 (your full-retirement age), and chose to begin receiving benefits at age 62. You would receive only $750, due to a 25% reduction.

Be careful. If you choose to work while receiving Social Security benefits before your normal retirement age, your benefits could be reduced $1 for every $2 you earn over the annual limit ($16,920 in 2017). In the year you reach full-retirement age, the benefit is reduced $1 for every $3 you earn over a higher limit ($44,880 in 2017). However, after you reach full-retirement age, the benefits will continue in full regardless of how much income you earn. Those Social Security income benefits, however, may be taxable to you based on your total level of income.

Waiting to Normal Retirement Age or later: Depending on your birth year, your normal retirement age will likely be between 66 and 67. The longer you wait, the greater the increase you will see in your Social Security income. Someone born in 1943 or later will see his/her benefit increased by 8% for each full year benefits are delayed after reaching full-retirement age. That increase will continue until you reach age 70.

For those who have family history of longer life spans and those who are more financially sound, waiting to your normal retirement age or until age 70 may make the most sense.

Marriage: For those contemplating marriage, you should know that there are a few benefits available within Social Security for married couples. First, a spouse may receive up to 50% of the Social Security income of his/her spouse. That works great when there is a five-year age difference between spouses as one can elect to receive the spousal benefit at age 62 and upon reaching full-retirement age switch to their own full benefit. You are, however, limited to taking the higher of your own benefit or your spousal benefit.

Second, there is a survivorship benefit that pays a portion of the deceased spouse’s benefit to the survivor for the balance is his/her life. The survivor normally needs to be age 62 or older to begin receiving the survivorship benefit. Third, Social Security may provide a spousal benefit in the event of a divorce.

For more information on Social Security benefits, visit Socialsecurity.gov/planners.

Author Profile

Woody Derricks, CFP®
Woody Derricks, CFP®
Throughout my nearly 20 years as a Financial Advisor, I have seen some of the best and worst markets in our history. That experience allows me to approach my clients with the knowledge of how the markets fit into their greater financial picture. At Partnership Wealth Management we help everyday people who have accumulated wealth make sense of what they have and work with them to maximize their financial opportunities in a relaxed, comfortable, and professional environment. While we help people from all walks of life, many of our clients are same-sex couples searching for a knowledgeable, LGBT-friendly financial advisor to help them with their unique financial planning needs. I am a CERTIFIED FINANCIAL PLANNER™ professional and have the Accredited Domestic Partnership Advisor(sm) designation. As a Registered Investment Advisor, we are not tied to any company’s investment products allowing us to provide unbiased advice by offering a wide array of investments and other products to our clients. Since 2001, I have been writing articles on financial planning for several regional newspapers and have been a guest speaker on LGBT financial issues for various local and national organizations. Additionally, I have conducted financial planning workshops for large corporations and government agencies. Non-Profit Work I believe that it is important to give back to the community and currently serve as the treasurer for FreeState Justice and as a co-founder/president of Paws for a Cause. I’m a current member of several LBGT, environmental, and local community groups. Personal My wife, Heidi and I enjoy camping, hiking, and traveling with our daughter, Elise, and our dogs, Fenway & Roxy. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and federally registered CFP (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.