What is the Best Age for Social Security Retirement Benefits?
Last updated on 2021/5/1
When you begin your career, you probably do not think about retirement or Social Security retirement benefits. At 22, freshly graduated from college, you probably only focus on finding a nice place to live, settling into your new job, finding a decent gym and dating. You have the world on a string as the old song goes and learning how to handle money and plan for your retirement probably comes last on your list if it made your to-do list at all.
The Best Age for Social Security Retirement Benefits
Now is the time to learn good financial management though. Sure, you need to pay your bills on time and balance your checkbook, but you also need to start planning for your retirement. It may seem light-years off, but 40 to 43 years from now, you will need to have a plan in place and the ability to segue into either retirement or that second or third or fourth career you always wanted.
A large part of that will come from your individual retirement account (IRA) which may be an annuity or a 401(k) or Roth account. Another aspect will be your Social Security disbursements though. You will start out with a Social Security account as soon as you begin your first job. Your Social Security taxes come out of your paycheck. Your employer pays part, you pay part. So, when you retire, you will have at least two accounts from which to draw money to live off of, assuming that your employer offered an IRA or that you opened one independently.
When Can You Access Your Social Security Retirement Benefits?
Typically, you can access your Social Security benefits between the ages of 62 and 70. You choose the age. At 62, you will not receive the full payment each month. Instead, you will receive 70 percent of the full payment.
The Social Security Administration recognizes that sometimes things happen that force you into early retirement. Such was the case for my mama. A drunk driver hit our car one morning as mama drove me to school. She was unable to work outside the home after that accident and accessed her Social Security account using the disability option.
If you become disabled to the point that you can no longer work at all, you can file paperwork to access your Social Security benefits early. Unlike elective retirement, when you are forced into retirement by permanent disability the Administration imposes no age limit. Mama was in her 40’s when the accident happened. If you are hurt at any age after you have begun working, you may file to access your benefits.
This article really focuses on elective retirement, but I want you to understand that you will have options if something horrid happens. Let’s hope it does not and every one of the awesome readers of the Goalry brands has a mega-long and successful career.
Retiring Early Electively
Here is the deal. You do not have to wait until you are 62 to 70 to retire, but unless disabled, you cannot access the Social Security benefits. You will potentially be able to access the funds in your IRA. While the Administration has rules about how much money you can earn while receiving Social Security benefits, the IRA carries no such stipulation.
Let’s say you think as my dad did. You might think that you would like to retire. You have tons of books you want to read. You have all that fishing equipment and your tackle box calls to you. “Hey, let’s catch some bass.” Eh, he had already had a career as a military policeman in the US Army and 30 years as a Southern Baptist minister, so maybe he thought it was time. Then, he tried that and retirement turned out to be… BORING. My dad quickly decided he wanted another career.
Is It Good to Wait to Access Your Social Security Benefits Fully?
He had retired before 62 - in his late 50’s actually - so he accessed his annuity and stock portfolio but did not touch his Social Security until later. By using his annuity only for monthly payments, he had no restrictions on beginning another career. He went for something fun and began… hold on to your hats… driving a private ambulance. That grown man sounded like a kid every time he came home, saying, “I got to use the siren today!”
He waited until he reached the age where he could access 100 percent of his Social Security benefits to file for them. This let him enjoy driving with the siren blasting for as long as he could. It also left him time for another mini-career, that one a stint at a friend’s funeral home. Go figure, ministers make good grief counselors and he got his friend to let him drive the hearse.
So, as you can see from the example, you can either retire to retire or you can retire from one career to begin another. In either scenario, you can access the money in your IRA either before your Social Security monies or at the same time, depending on the age at which you decide to retire. (If you are like me, you learned from your parent and never want to retire.)
Picking the Right Age for Retirement or Career Segue
So, how do you know what the right age is to retire? What about the right age to access your Social Security benefits?
Obviously, the answer to that question differs for every individual. The right time to retire for you might significantly differ from that of your spouse, best friend, sibling, etc. No person can choose for you nor should they. Your career decisions, including when or whether to retire remain solely up to you.
One buddy of mine who used to also work for the University of Oklahoma decided to retire early in his mid-50’s. Turned out that he was more like my Daddy than I had ever imagined. The sweet guy made it six months as a retiree. Wrote a book thereby becoming an author. Began consulting then also went back to his original career at a different organization adding a second position with that organization, too. Yep. From one career to six months of retirement in which he found that golf like fishing was not meant to be an everyday thing to four careers. My kind of guy!
You Can Change Your Decision
You get to decide. The great thing about IRAs and Social Security benefits is you can stop and start the payments. You can change your mind. You do not have to keep taking the disbursements if you decide you want a second career or more. So, even once you make your initial decision, know that you have not locked yourself into it.
Social Security is like longevity insurance. It’s a stream of payments that will not stop throughout your life, so delaying your benefits to keep those payments as large as possible forms a helpful base to your retirement plan.
Brent Neiser, a certified financial planner and senior director at the National Endowment for Financial Education, said this in an interview with BankRate.com.
Social Security Considerations
Picking an age to access your benefits from the Administration means understanding that at younger ages, such as 62, you will not receive a full monthly disbursement. Here is a quick run-down on the percentage of full disbursement you get monthly depending on the age at which you elect to begin payments.
For example, those retiring at age 62, would receive 70 percent of their benefit amount as long as they were born in 1960 or thereafter. At 62, your disbursement would be 75 percent of the full amount. While 65 used to be the typical retirement age, today, it’s 67. Retiring at 67 gets you 100 percent of your Administration benefits.
Here’s the cool thing. The Administration pays you a bonus of sorts if you wait to access your benefits. If that sounds too good to be true, it is not.
If you wait until 68 to access your benefits, the Administration pays you 108 percent of your monthly disbursement. At 69, that goes up to 116 percent and at 70, you receive 124 percent per month of your full benefit.
Let’s say you keep working and want to obtain your benefits. You have a limit to what you are allowed to earn and in 2020 that’s $18,240. They typically increase the amount a little bit each year to keep pace with the cost of living.
Deciding on an Age
You can make a tentative plan now for the age at which you want to retire. Realize though that things happen and people change. Also, you may decide at the time that you want to retire, then change your mind. So, you can plan now, but give yourself permission to change your mind.
Many factors will influence your retirement decision as you get older. They include:
personal preferences
financial factors
current cash needs
other retirement plans
personal health
spousal health
family history
The best course of action is to discuss your plan with your financial advisor. If something changes in your life, such as your health or your stock portfolio, etc. re-visit your financial advisor for a second discussion. While you can change your mind an un-retire, the age at which you initially begin receiving Social Security will disbursements locks you into the monthly benefit amount you receive until your death.
Scroll up and look at that table again. If you elect to start getting your disbursements from the Administration at 62, you will always get 70 percent of what your 100 percent amount would have been. Even if you live to 90, every month you will get 70 percent of what you would have received if you had waited until 67 to elect benefits. Similarly, if you wait until you reach the age of 66, every month thereafter you will get a check for 93.3 percent of what you would have gotten if you waited the extra year.
That also means that if you do not start your benefits until you reach the age of 70, every month you get a check for 124 percent of what you would have received. Every month the government will give you a bonus – even if you live to 90 or 100. It literally pays you to delay retirement for as long as you can or to at least delay accepting Social Security for as long as you can.
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Not Everyone Qualifies for Social Security Retirement Benefits
Take a deep breath. I am not trying to scare you. So long as you have worked regularly in your lifetime, you should have eligibility.
If you are reading this though and you work day labor that gets paid in cash, such as migrant labor, farm labor, or a cash-based business, you may have a problem. That is because your employers are paying for your Social Security contributions every month you work at a paid hourly or salaried job. On each pay stub, you will see an area marked Federal Insurance Contributions Act (FICA) taxes. Your FICA payments fund the Social Security Administration account from which you are paid.
Those that work for themselves, the self-employed, must pay the taxes themselves. So, if you currently work as a freelancer and always have, you must have paid your own FICA or you have not funded yourself for Social Security.
Also, if you worked for a few years, let’s say five, then married and quit your job to become a house husband or housewife, you probably have not earned enough credits as the Administration refers to it, to obtain Social Security disbursements. This is one of the situations where it is very helpful to have a savings account. Try to put some money on the side every month. And the best solution is to keep that money in a savings account. If you don’t have a savings account yet, maybe we can help you to choose one that fits best your finances. Here are our suggestions:
Social Security Retirement Benefits: How the Heck Do I Know If I Qualify?
I am so glad you asked! The Social Security Administration went paperless recently. It created an online database of everyone’s information. You can register for an SSA account on its website and access your account information. While it will provide you annual data for every year you ever worked at a job for an employer, you do not need to count them up or do any math. At the top of the SSA report, it will tell you if you have already amassed enough credits to receive benefits when you retire.
OMG, What if I Do Not Have Enough?
Well, provided you are a Millennial reading this, you would not be expected to have them amassed yet. By the time you reach the age of 45 or 50 though, you should have already amassed the credits required. Assuming you landed your first job at about 18, even as late as 22, and you worked until you reached 45 or 50, you would basically amass the credits naturally. You only need to get it together and get a job, if you have reached the age of 30 and the report says you need credits and have not worked enough to have earned them.
Yes, the Administration tries to be that helpful. You should check your SSA report at least every five years. Here is how to do that.
Start by visiting the SSA FAQ article on obtaining your Social Security Statement
Follow the registration link in the article to create an account, if you do not already have one. If you do have an online account with them already, simply sign in to it
Click on the link for the personal Social Security Statement. This opens your statement in a secure window. It includes your earnings records which reflect your FICA payments. The statement also provides estimates for retirement, disability, and survivors’ benefits
If you happen to read this and you already reached the age of 60, you still get a paper statement mailed to you. You will get it in the mail about three months before your birthday. You can still make a snazzy online account so you can check things there.
What Is a Survivor Benefit?
One last type of Social Security benefit exists to discuss. Let’s say that you get married and your spouse, unfortunately, passes away relatively young – in their 40’s or 50’s. With the average American life expectancy above 78 years old now, that is pretty young still. You could qualify for survivors’ benefits which would provide you with a percentage of the disbursement your spouse would have received at retirement age by accessing their benefits.
Your spouse must have obtained the 40 credits necessary to qualify for Social Security. This typically would come from a decade of full-time work at a job that pays FICA taxes. Elderly parents who live with or depend on their child for support can also apply for survivor benefits if their supporting child dies.
In these cases, you report the death as soon as possible and begin the paperwork for benefits. You do not have a waiting period. You may apply for survivor benefits at any age so long as your spouse or child providing support had amassed the appropriate amount of credits.
Doing the Math to Decide When to Begin Benefits
You can set your retirement age for accessing Social Security benefits by calculating your break-even age. That refers to the age at which you would receive your highest possible total benefit. That is when the highest possible benefit (124 percent at this writing) exceeds the value of the lower benefit (70 percent at this writing). To do this, you need to know your life expectancy. You can fudge by using the generic life expectancy of 78.6 years.
Multiply your expected benefit amounts based on start age by 12 to determine the annual payment. Multiply that number by the number of years you expect to receive benefits – your death. Since everyone is different, your optimum age will not be the same as anyone else’s.