My last post argued that you may be better off to delay the receipt of your Social Security benefits to age 70. Taking benefits earlier results in a lower monthly payment, and likely a lower total amount of benefits paid out over your lifetime.
Of course, that is not always the case. To determine your optimal beginning date, you will need to do some research. Fortunately, the Social Security Administration makes this easy to do on their website.
To calculate an accurate estimate of your benefits you will need to know your Full Retirement Age or FRA. This is the age at which you are entitled to receive your full Social Security Benefit.
If you were born after 1959, your FRA is 67. You don’t even need a calculator. If you were born between 1943 and 1954, your FRA is 66. Again, no calculator needed. However, if you were born between 1955 and 1960, your FRA will be age 66 + so many months depending on exactly when you were born.
Sound confusing? It’s not. Click here and enter your year of birth to determine your FRA.
Next you will need an estimate of what your Social Security benefits may be at age 62, FRA and at age 70.
From there you will be able to enter some basic information and get an accurate estimate of what your benefits may be. I really like that this calculator estimates your benefit amounts at various ages: 62, FRA and 70. That way you can easily see how much your monthly benefit could change, if you were to begin receiving benefits early or choose to delay them a while longer.
If you want the most accurate information, the Social Security website has a Detailed Calculator that was recently updated to reflect current economic assumptions. Once you have your Social Security statement and have verified your earnings information, you can then enter that information into the Detailed Calculator to get a more accurate estimate of your benefits.
Or you could create a “my Social Security” account and access your benefit information that way. There you will be able to access your Social Security statement, get an estimate of your benefits and verify the accuracy of your earnings. For more information about the benefits of establishing a my Social Security account, watch this video: https://youtu.be/xxLG6l4tvlA
How long will you live? That’s the ultimate unknown when determining your optimal age to begin benefits. Live a long life and you may be better off to delay your benefits until age 70. Die early and, well, …
One of the arguments in favor of taking Social Security early is that you might not live long enough to benefit from earning delayed credits on your Social Security benefits. That’s a reasonable argument especially if you have health issues or other reasons to believe that you are likely to live a shorter than average lifetime. However, there is a better than average chance that you will live long enough to benefit from delaying your first Social Security check.
According to the Social Security Administration, the average man born in 1956 can expect to live to about age 83.6. A woman born that year has a life expectancy of 86.3. If you want to calculate your life expectancy using the SSA actuarial tables, click here.
A small decision with big consequences. Taking Social Security benefits at 62, FRA or age 70 might seem like a difference of only a few hundred dollars a month. But these dollars add up over time. In the case of a married couple, assuming that both live to their average life expectancy, the difference in the total amount paid out in Social Security benefits over your remaining lifetime can be $100,000 or more.
How long you live and what your monthly benefit amount is at various ages are only two of the considerations to keep in mind when planning Social Security income. Other considerations include if you are married, divorced or single, survivor benefits for widows, benefits for minor children as well as the spouse who cares for them, your tax bracket, whether or not you continue to work past age 62, other sources of income, etc.
For more information on how to include Social Security benefits in your retirement income plan, talk to your financial advisor or visit the Social Security website.
To learn how Social Security and retirement planning work together to maximize your retirement income, watch this video: