Posted on 08/02/2018 9:22:46 AM PDT by Red Badger
Social Security benefits can be claimed at any point after a recipient turns age 62, and most Americans take their Social Security as soon as they can. Claiming benefits early can be smart, but it can pay off to wait. If you're deciding when to start receiving Social Security, here's what to consider. Estimate your expenses
Retirement usually means a big drop in income, and if you don't have a solid grasp on what your spending is going to look like in retirement, then you won't be able to make the best decision on when to claim.
Depending on who you talk to, experts usually recommend budgeting for 70% to 80% of your pre-retirement income to cover expenses in retirement. However, the exact amount you'll need depends on your specific situation.
According to the Bureau of Labor Statistics (BLS), retirees spend the most money on home mortgages and auto loans, so if those loans won't be paid off when you retire, you'll need to budget accordingly. Overall, the BLS reports that the average 65-plus household spends about $45,221 per year, and housing and transportation account for $15,711 and $6,830 per year, respectively.
Healthcare is another big expense in retirement, and it's usually smart to over-budget when it comes to planning for those expenses. If you're healthy, your costs might not increase significantly at first, but you'll likely require more healthcare as you get older, and that healthcare won't be cheap. Healthcare spending in over-65 households totals $5,877 per year, according to the BLS, including $4,029 for health insurance and another $694 for medicine. Fidelity Investments estimates that a couple retiring at 65 this year will fork out over $275,000 in healthcare expenses during their retirement, and ultimately, the tally could be tens of thousands of dollars higher than that if you need long-term care at some point, too. Social Security options
If you've paid into Social Security over a career lasting at least 10 years, there's a good chance you'll qualify for benefits.
You can claim your benefits when you turn 62, but you'll receive a reduced payment. If you go the claim-early route, apply three months before you turn 62, so that you can receive your first check in the month after you turn 62.
If you want to receive 100% of the benefit you're eligible for, you'll need to wait until you reach your full retirement age to claim. Your full retirement age depends on the year in which you were born, but for people turning 62 in 2018, it is 66 years and 4 months.
Your third option is to wait until after your full retirement age to claim so that you can receive delayed retirement credits. These credits increase your payment for every month beyond your full retirement age that you delay. Overall, delaying increases your benefit by 8% for every year you hold off, until age 70.
The following chart shows how much a Social Security recipient would receive if their full retirement age is 66, their benefit is $1,000, and they chose to claim benefits between age 62 and age 70.
Data source: Author's calculations.
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While this example shows how benefits change depending on when you claim, the exact amount you'll receive in benefits is determined by a complex calculation based on your highest 35 years of earnings.
You can create a login here to view your actual Social Security benefit, but the average monthly Social Security check is $1,404 in 2018, and the average check paid to recipients age 62, age 66, or age 70 last year was $1,112.30, $1,382.78, and $1,510.49, respectively.
Once you know your expected Social Security income at age 62, age 66, and age 70 add to it any other sources of retirement income you'll receive, such as pensions and investment income. If you've thoroughly calculated your projected retirement expenses, then you should be able to use these numbers to determine the age at which you can reasonably expect to afford to retire. Important considerations
If you have ample income in retirement from other sources, it might make the most sense to embrace a claim-early and-invest strategy. As you can see in the following chart, waiting to claim benefits doesn't break even with taking benefits early until you reach your late 70s or early 80s, depending on when you claim. But if you claim benefits early and then invest that income, you could conceivably push that breakeven point back even further, depending on your annual returns.
Data source: Author's calculations.
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It's also important to consider the impact of claiming decisions on your spouse's financial security after your death. If your widow and widower is full retirement age, they can receive 100% of your benefit amount after you pass away, but only up to what you would otherwise be receiving if you were still alive. Therefore, if you claim early and receive a smaller monthly benefit, it may not be enough money for your surviving spouse to maintain his or her lifestyle.
If you're working in a high-paying job (relative to what you earned early on in your career), you might want to delay claiming your benefit anyway. If you've already accumulated a 35-year work history, additional high-earning years will replace lower-earning years in your benefit calculation, thereby giving your full retirement age benefit a boost.
Furthermore, if you plan on working into your early 60s, then you should know that if your income exceeds limits, the IRS will tax some of your Social Security until you reach your full retirement age. In those cases, delaying when you claim so that you lower your income taxes might be a smart choice.
Overall, when to claim your Social Security benefits is one of the most complex, and important, choices you'll face leading up to retirement, so make sure you understand the various retirement strategies available to you.
I took mine at 66; still working full time. The SS checks paid off loans and permitted us to remodel 2 bathrooms and paint the house (over 18 months).
Medicare Part A (inpatient care) is mandatory for every one who turns 65. You don't have a choice. Goods news, Part A is free.
If you don't want or need any of the other Medicare benefits, you'e not required to enroll in them.
However, if you are drawing SS when you turn 65, the feds will automatically sign you up for Part A (free) and deduct your Part B (outpatient care)from your SS check. It's about $120 a month.
Or you can decline the Part B (I did) and save the $120 or so a month they take from your SS check.
Here too. I’m 63 and working until I’m 66. I plan on continuing to work at my current job. I can collect my pension and go part time. Well, at least that’s the plan. :-)
Thanks
I signed up for Medicare Part A, required; I am working and will be covered by company provided insurance until about age 70. Won’t sign up for other coverage until then.
All these analyses usually get the following factors wrong:
1) Likelihood of death
2) Opportunity cost of money while waiting for future payments
3) Congress can declare that you get none later
4) Tax changes
5) Enjoyment value of retiring earlier
I’ll be taking it at age 62 precisely. I’m not going to wait for something to happen. If they’ll pay me to not work, I’ll do that day 1!
I did not start collecting SS when I turned 62, as I don’t need it, even though I retired at 60. My wife and I both have significant pension income. But when one of us dies, the larger the SS payout, the better off that person will be. If I wait until 70 and die at 69, I’ll be too dead to care that I never got a dime. Had I started at 62 and live to be 90, I’d definitely care that I have a much smaller monthly check vs having waited until FRA or 70.
You should set up and IRA in HER NAME, contribute as much as you can each month.
Best IRA Accounts of 2018:
https://www.nerdwallet.com/blog/investing/the-best-ira-account-providers/
No state income tax, but there maybe federal income tax.
The surviving spouse gets only 50% of the dead spouses benefit...............
Tables are wrong, I took at 62 my benefit is above the highest in the table
Sure is cheaper than paying medical insurance premiums every month forever.
Remember you only get 50% of the dead spouses benefit, but 100% of yours........................
They change from year to year and whatever your birth year is...............
specifically, if you receive SS you generally should be automatically enrolled in Medicare.
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I waited till 70. Last May. I intend to work probably 2 more years. Extra money goes to fixing up the house and getting out of debt. Mortgage is paid off, so it’s going pretty fast now.
But then I like my job.
I have a tendency to agree with this. I think for many reasonably healthy people, the 60's are going to be the most active decade, but each successive decade will slow down. Anecdotally, I would plan to do the majority of my remaining traveling in my 60's (just shy of 7 years away), and go strong until the middle of my 70's. We'll see what happens after that.
I'll have other income streams, and won't necessarily have to take my SS at early retirement age, but I can't see waiting until full retirement age, either.
No, not if it’s some kind of approved by the IRS or SS or heck, the FBI. That’s for Medicare B. Might as well get A. It’s free.
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