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When to Collect Social Security — Now or Later?

Photo of author, Danette Millhouse.
Danette Millhouse
In Memoriam (June 15, 1964 - May 30, 2021)

If someone asked you if you would rather have $1,000 guaranteed today or $1,200 non-guaranteed tomorrow, what would your response be? Most likely, you would choose the former because it is guaranteed money. This is the same basic principle behind deciding when to collect Social Security. Although the Social Security Administration considers full retirement age (or FRA) at 66 or 67 years old (depending on your year of birth), workers can start collecting social security as early as age 62, but at a reduced benefit (as much as 30 percent).

Since no one has a crystal ball to determine their life span, let’s take a look at some common reasons why someone might choose to collect social security early at a reduced benefit, as compared to waiting for normal (or full) retirement age.

Common reasons for collecting social security benefits early (at age 62):

  • Worried that Congress will enact legislation that could scale back retirement benefits.
  • Concerned about the stability and longevity of the entire Social Security system.
  • Individual is single and in poor health, not sure whether he/she will make it to full retirement age; or in the case of a married couple, both individuals are in poor health.
  • Individual is not able to work and could benefit from the income now.
  • Individual has a disabled child who is entitled to social security benefits through his parent but cannot receive money until the parent claims the benefit for himself.
  • Individual is working but earning less than $18,960 a year (in 2021). Note: Collecting social security in this situation could push the individual into a higher earnings tax bracket.
  • Collecting social security means the individual can delay drawing from his/her tax-deferred accounts (e.g. 401(k) or traditional IRA).


Common reasons to wait until full retirement age (FRA) or later:

  • There is no excess earnings penalty, so individuals can continue to work with no earnings cap.
  • By delaying social security, the individual has less of a chance of outliving his money during retirement years.
  • Waiting till age 70, the individual’s monthly benefits will be at their maximum level; therefore, when he/she passes, there is peace of mind that the spouse will continue to collect those benefits for the remainder of their life.
  • If widowed and collecting survivor benefits, there may not be a need to rely on one’s social security. By waiting until age 70, the individual will receive the maximize monthly benefit.


What if I already filed for Social Security benefits but want to change my mind?

If you have already filed with the Social Security Administration, you can change your mind up to 12 months from your filing date. This is called a do-over — but you only get one do-over from the SSA. Here’s how it works:

  • You can withdraw your application up to 12 months from filing date.
  • You must pay back all the benefits you received up to that point.
  • The SSA then treats your case like you had never enrolled.
  • Your monthly benefit will begin to grow until you start collecting again.

Note: You are not eligible for the do-over if it has been more than 12 months from file date, or your age is between FRA and 70. In this case, you can choose to voluntarily suspend your social security benefits. During this time, you will accrue delayed retirement credits, which will increase your monthly retirement benefit when you start collecting again. To turn your benefits back on, simply contact the SSA — or the SSA will automatically turn on your benefits the month you turn 70 years old.

“Before anything else, preparation is the key to success.” Alexander Graham Bell

Preparing for a comfortable retirement takes careful planning. Once you do your research and have all the facts, you can make a more informed decision that best fits your personal situation. However, if proper preparation seems like a daunting task to tackle on your own, seek the services of a professional financial advisor. With their expertise and guidance, you can make a retirement plan that will help you achieve your financial goals, no matter what life throws at you.


Resources:

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