Retirement, Social Security

Social Security: What’s Your Magic Number?

Social Security originally offered full benefits at age 65. Later changes gradually raised the eligibility point for those born after 1937. Full retirement age is now as high as 67. You can also retire as early as age 62 and receive a reduced benefit, or start later – up to age 70 – in exchange for a higher monthly amount.The difference between retiring early at 62 and retiring late at 70 can change your monthly benefit by as much as 30 percent, higher or lower. Eye on Money magazine has an excellent table showing the impact by birth year (see page 15 in the PDF document), but let’s walk through an example.

Suppose you were born on June 1, 1951. You will turn 62 a couple of weeks from now (Happy Birthday!) and be faced with choices. You can retire this year, wait four more years until your full retirement age (66 in this case) or wait eight years and claim higher benefits at age 70.

  • If you retire now, you’ll receive 75% of your full benefit. The reduction is permanent.
  • If you wait until your 66th birthday in year 2017, you’ll receive your full benefit.
  • If you wait until you turn 70 in 2021, your benefit will be 132 percent of the full amount until you die

What should you do? Some people have to retire early because of job loss, poor health or other problems. If you are fortunate enough to have a choice, you still need to consider several factors. The most important is one we usually can’t know: your lifespan.

According to the Republic Wealth Life Expectancy Calculator, a reasonably healthy male who is presently 61 can expect to live 23 more years to age 84. This projection is based on averages, of course. Your day could arrive sooner or later. You should also consider your spouse, if you are married, since your Social Security decision will also affect their potential survivor’s benefit.

Another issue is whether you are still working or not. Your Social Security benefit can be reduced and/or taxed at higher rates if you have wage or self-employment income.

As a general rule, most people come out ahead by waiting as long as possible and receiving a higher benefit in those final years. This presumes you can keep working or have sufficient assets to support yourself without Social Security, and that you have average life expectancy.

Your situation is unique and this is a big decision. Your choice has long-term, irreversible consequences. Kenny and I have helped many pre-retirees think through these issues, so feel free to call on us. We are here to help.


Disclosure: This commentary is presented only to provide general information on our company and our investment strategies. The material contains the current opinion of Republic Wealth Advisors (KCM) as of the date of creation which are subject to change without notice. The information contained herein does not constitutes an offer to sell (nor the solicitation of an offer to buy) any security. Statements concerning financial market trends are based on current market conditions which will fluctuate. Past performance is not indicative of future results.

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