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Social Security Retirement Age and Benefits

Jan 28, 2021 | Retirement

by ACTEC Fellows Crystal West Edwards and Rosemarie S. Sam

What are the advantages and disadvantages of taking Social Security retirement benefits early, at age 62? Should you delay taking Social Security retirement benefits to age 70? How does taking retirement benefits impact your spouse, dependents and disabled dependents? ACTEC Fellows Crystal West Edwards and Rosemarie S. Sam explain what Americans need to consider in determining when to take their Social Security retirement benefits.

transcript

Hi, I’m Rosemarie Sam from Honolulu, Hawaii, and I’m an ACTEC Fellow. I’m also here with ACTEC Fellow Crystal Edwards from Morristown, New Jersey. Our topic today is Social Security Retirement Benefits. My first question is, when can you start receiving Social Security retirement benefits?

Social Security retirement benefits can begin as early as age 62, as late as age 70.

Are there advantages or disadvantages of taking retirement benefits early?

The advantage of taking retirement benefits early is that you start to collect the money that you’ve been paying over to the government monthly since you started working. The downside to that, however, is that it causes a permanent reduction in your Social Security retirement benefit. Depending on what someone’s retirement age is, the decision to collect Social Security early could result in a monthly reduction of about 20 to 30 percent of what they would have gotten if they waited until full retirement age. So, the downside is you may be collecting less money, the benefit, however, is that at some point, and there is a calculation to be had here, it’s possible that if you collect early and live long enough, you could collect more money than if you delayed and passed away sooner. Though no one has the crystal ball as to when it’s going to be their time to go. We have to rely on the financial advisers a bit to guide us with respect to the best option there.

What are some of the advantages or disadvantages of delaying your taking of benefits? 

The greatest advantage of delaying collecting Social Security is let’s say, for example, if I have someone who is age 67, that’s their full retirement age — 67, and they delay collection of Social Security until age 70. That could result in a 7 to 8 percent increase in their monthly Social Security award. So, the greatest benefit to delaying is that it’s more money in our pocket monthly going forward. The downside, however, is that we’d have to live up until a certain point in order to balance out the benefit of getting the higher amount of money against the disadvantage of having years that we could have collected, though we didn’t. 

What is the impact on a spouse or child?

The Social Security program has dependent benefits that spouses, minor children, or adult children living with disabilities are able to utilize. Those benefits are directly related to the death, disability, or retirement of the insured person whose record one would be collecting social security benefits off of. So, the greatest benefit to let’s say, for example, early retirement for someone could also be the greatest disadvantage for one of their dependents. For example, if I’m age 62 and I decide that I want to start collecting Social Security because the worst thing that could happen in my mind is that the federal government get a windfall and I died the day after and I never get a chance to get all of my money back. If that’s what my goal is and I start to collect Social Security at the age of 62, if I have an adult child with disabilities I must recognize that in doing that it would cause my child to receive really great social security benefits of about 60 percent of what my social security benefit is; but at the same time if they’re receiving government benefits that are based on income or assets, that decision to collect early could negatively impact them. So, it is always important before making the decision to collect either early, on time, or to delay — especially if you have special circumstances like minor children, dependents, spouses, or disabled adult children — to sit down and have a conversation with an attorney and with the financial adviser so that you can make a well-rounded, well-informed decision. 

What are some considerations when deciding when to take benefits?

So, the benefits to, or I should say some of the considerations when we’re trying to determine kind of when, where, and how to start collecting Social Security benefits, is primarily going to be, what is it that you need on a monthly basis? What are your anticipated household expenses and other considerations just in the household that could impact whether or not you have the ability to delay collecting Social Security? If you live in a high property tax state like New Jersey, you’re most likely going to want to start collecting Social Security as soon as humanly possible, right? So, however much money one needs is always going to be at the forefront of when to collect. But secondary to that, if need isn’t an issue and it’s really just a matter of what’s best, sit down with counsel. If there aren’t those special factors that I mentioned, if one doesn’t have minor children that they have to plan for or children living with disabilities, it’s really going to boil down to a math question of what’s the likelihood that you’ll survive a certain designated period of time that would help determine whether or not early retirement is best, retiring at your full retirement age or actually delaying. Again, knowing though, that it’s not a perfect science.

Crystal, this has been very informative. Thank you so much.

Thank you for having me. Have a great day. 

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