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Summary: While most workers will be entitled to Social Security (or Social Security spousal) benefits when they retire, many are not aware that by making just a few changes in terms of how or when this income stream is started, it can make a substantial difference in the total amount that is received over time.
There are literally thousands of combinations of ways that you can take your Social Security benefits in retirement – and oftentimes, the difference between a good decision and a not-so-good decision can amount to $100,000 or more in benefits that you receive (or don’t receive) over the course of your lifetime.
For many years, the age at which eligible individuals could receive Social Security retirement benefits was 65. However, in the early 1980s, the “Full Retirement Age” was changed in order to help keep the Social Security program financially solvent. Now, Full Retirement Age for Social Security can be anywhere between 65 and 67, depending on the year you were born.
| Year of birth | Minimum retirement age for full benefits |
|---|---|
| Year of birth1937 or before | Minimum retirement age for full benefits65 |
| Year of birth1938 | Minimum retirement age for full benefits65 + 2 months |
| Year of birth1939 | Minimum retirement age for full benefits65 + 4 months |
| Year of birth1940 | Minimum retirement age for full benefits65 + 6 months |
| Year of birth1941 | Minimum retirement age for full benefits65 + 8 months |
| Year of birth1942 | Minimum retirement age for full benefits65 + 10 months |
| Year of birth1943 to 1954 | Minimum retirement age for full benefits66 |
| Year of birth1955 | Minimum retirement age for full benefits66 + 2 months |
| Year of birth1956 | Minimum retirement age for full benefits66 + 4 months |
| Year of birth1957 | Minimum retirement age for full benefits66 + 6 months |
| Year of birth1958 | Minimum retirement age for full benefits66 + 8 months |
| Year of birth1959 | Minimum retirement age for full benefits66 + 10 months |
| Year of birth1960 or later | Minimum retirement age for full benefits67 |
The good news is that you don’t have to wait that long to start taking your Social Security retirement benefits. In fact, eligible recipients can begin this income as early as age 62. If, however, you start your benefits before your Full Retirement Age, the dollar amount will be reduced – and this reduction will be permanent.
Conversely, if you wait until after you have reached your Full Retirement Age to begin your Social Security retirement income, you can actually give yourself a “raise.” Due to the concept of delayed retirement credits, you will receive an increase of 8% in the dollar amount of your benefits for each year you wait. So, the longer you wait, the higher your benefit amount will grow.
This increase will also be permanent – and it can make a tremendous impact on the amount of money you receive each month, as well as the total amount of Social Security retirement benefits you collect.
As an example, let’s say that your Full Retirement Age (FRA) for Social Security retirement income is 66, and the amount that you would receive if you started taking your benefit at that time is $2,000 per month.
By waiting four years to start receiving this income, though, you can increase the dollar amount by 8% each year – up until you reach the age of 70. (Note that you can continue to delay the receipt of your Social Security retirement benefits past age 70, however, the delayed income credit will not continue to increase.)
So, by waiting the extra four years to start taking your Social Security benefits, you can essentially give yourself a 32% raise…and that doesn’t even include any additional cost-of-living adjustments!
Although most people know that Social Security provides a retirement income benefit, this program actually offers both income and a financial “safety net” in other situations, as well. For instance, for those who have paid taxes into the system – and who have also accumulated enough Social Security eligibility credits – there are a number of benefits that you and / or your spouse and dependents may be entitled to, such as:
| If you take benefits at age: | Monthly benefit amount: | Amount of $ increase: |
|---|---|---|
| If you take benefits at age:66 | Monthly benefit amount:$2,000.00 | Amount of $ increase:0% |
| If you take benefits at age:67 | Monthly benefit amount:$2,160.00 | Amount of $ increase:8% |
| If you take benefits at age:68 | Monthly benefit amount:$2,332.80 | Amount of $ increase:16% |
| If you take benefits at age:69 | Monthly benefit amount:$2,519.42 | Amount of $ increase:24% |
| If you take benefits at age:70 | Monthly benefit amount:$2,720.98 | Amount of $ increase:32% |
If you qualify for Social Security, you can count on a steady stream of income for the remainder of your lifetime. But it still may not be enough to help you maintain your current lifestyle. With that in mind, the best Social Security retirement income strategy is the one that works for your specific short- and long-term financial objectives, and that can also be integrated with other future income sources.
Alliance America is an insurance and financial services company. Our financial planners and retirement income certified professionals can assist you in maximizing your retirement resources and help you to achieve your future goals. We have access to an array of products and services, all focused on helping you enjoy the retirement lifestyle you want and deserve. You can request a no-cost, no-obligation consultation by calling (833) 219-6884 today.
