How to Time Social Security Benefits

Social Security is government assistance program gives seniors in the United States an income after they retire.

 

 

 

 

 

 

As employees, they pay their taxes toward Social Security throughout adulthood and then begin collecting benefits when they have reached a certain age or become retired.

Seniors receive a monthly payment through Social Security as a form of income, and most seniors who are retired, it is part of their income stream. This extensive program has many rules depending on the financial situation, so it is important to be familiar with the basic regulations when creating a retirement plan.

By doing so, you can understand when the optimal time will be to apply for benefits based on your personal and financial situation. This can help you make the most out of your Social Security payments when you are retired. Since the best time to start receiving benefits will change depending on the person, you can consider the following points to determine when to apply for Social Security.

When to Apply for Benefits

The primary step is to consider what age you will begin to collect these benefits. Social Security uses a full retirement age, also known as the normal retirement age, for seniors to begin collecting unreduced benefits. Full retirement age to start collecting benefits is determined by the year a senior is born.

It is possible to apply for Social Security benefits before normal retirement, as early as 62 years of age. However, older adults can only receive reduced benefits. It is feasible to apply for Social Security benefits after full retirement age, in which there will be an increase in the monthly benefit amount.

Apply for Social Security benefits four months before you want to begin receiving payments. It is important to consider your full retirement age and the monthly benefit payment you are eligible for when selecting the best time to apply.

Amount for Monthly Benefits

In order to make the best retirement decisions and elect the best time to apply for the Social Security program, you should determine the monetary amount you can collect monthly through Social Security. Depending on a variety of factors, the monetary amount you can collect will vary. Below are some of the factors that will affect your Social Security benefit payments:

  • Your previous income
  • Your age
  • Your birth year
  • The date applied for the program
  • Your taxable earnings
  • If you are currently employed

Additional income that you are currently receiving will affect your Social Security benefits as well, such as pensions, annuities and interest. Because of all these financial details, you can receive an estimate of your potential payment amount before applying for Social Security. Inputting your personal and financial information, such as your Social Security earnings record, in the Retirement Estimator in the federal Social Security website can provide this potential amount. Benefit estimates can be used as an indicator for the best time to receive Social Security benefits.

Whether an individual applies for Social Security benefits early or later than his or her full retirement age, the amount the individual will receive over his or her lifetime will be generally the same. But there are pros and cons to either side of the coin. Read the following as it will explain further about what occurs when someone applies for Social Security early or late.

Applying Early for Social Security Benefits

For seniors who are applying for Social Security before the federal retirement age can be beneficial, and in some cases, necessary. However, doing so can have its advantages and disadvantages that come with applying early. An advantage would be that seniors can collect benefits for a longer period of time. But this means that he or she will collect less benefits over time. The extended period of collecting benefits means that the benefit amount is being spread out over the course of the senior’s life. For instance, a 66-year-old senior who has applied for Social Security at age 62 will receive reduced payments by 25 percent every month.

Since there are many factors affecting the benefit amount, especially when applying early. Review the subsequent factors before deciding whether applying early is right for you.

Employment Status

Depending on the situation, being employed between the age of 62 and normal retirement age can create restrictions to the amount of Social Security benefits that can be collected.

Health Status

If your health is poor, then it can be beneficial to collect benefits early.

Insurance Availability

If you are unemployed and start receiving benefit payments before age 65, you can lose the health insurance from you employer. Many seniors are not eligible for Medicare until 65 years of age.

Long-Term Plans

Consider your household and their longevity to plan for your retirement benefits in the long term.

Applying Later for Social Security Benefits

When you are deciding the right time to receive Social Security benefits, review whether all sources of income, such as pensions and annuities, will cover your cost of living each year of your retirement. Another aspect to delayed benefits your ability to access health care insurance and how you will cover the costs without Social Security payments. In order to receive Medicare, be sure to apply three months before turning 65 to avoid a delay or more expensive coverage.

One advantage to delaying Social Security benefit is that the benefit amount provided will be increased until the age of 70. How much the amount increases will depend on the birth year. The largest percentage increase would be at age 69. Once a senior reaches the age of 70, the increased percentage will no longer apply. Remember the increase in percentage is due to the shorter collecting period. The lifetime total of Social Security benefits remains the same, whether a senior is collecting early or late.

You can collect increased benefits between full retirement age and before turning 70, but you should only do this if your alternate sources of income can cover the living expense each year you are not collecting benefits.