When Should You Begin Collecting Social Security?

Q: I am thinking about signing up for Social Security and wonder when I should start collecting my Social Security Retirement Benefit.

A: Signing up for Social Security historically began at age 65. Most of us know that you are eligible for early retirement benefits when turning 62. If you begin drawing Social Security at this time, your monthly payment will be less than if you wait until later. There are also earning limits that may apply to you and that will impact how much Social Security benefits you are eligible to receive.

Here is the information I copied from the www.SSA.gov website on earning and collecting Social Security benefits in 2013.

If you are UNDER Full Retirement Age; The earnings limit for workers will be $15,120. SSA will deduct $1 from benefits for each $2 earned over $15,120.

In the YEAR you reach Full Retirement Age; The earning limit for people turning 66 in 2013 will be $40,080. SSA will deduct $1 from benefits for each $3 earned over $40,080 until the month the worker turns age 66.

The MONTH you reach Full Retirement Age; There is no limit on earnings for workers who are full retirement age or older for the entire year.

Caution: If you apply for benefits more than 6 months after you reach full retirement age, SSA can only pay the benefits for the previous 6 months.

This information illustrates that there may or may not be a financial benefit to collecting Social Security before your full retirement age of 66. For some individuals eligible for Social Security who are working part-time or at a lower wage, you may benefit significantly if you begin taking Social Security Retirement benefits early.

I would like to highlight the second benefit earnings limit rule. Think of Social Security Benefits in calendar years. You turned 65 in August of 2013. You will turn 66 in August of 2014. In August of 2013 you need to think about Medicare Parts A & B. How do you sign up for Medicare? Do you need Medicare? You may still be too young to collect Social Security because the earning limit is $15,120. If you make $62,000 a year, it doesn’t make sense to sign up for Social Security,

In January of 2014, that earning limit changes for you. January of 2014 is the time when your earning limit rises to $40,080. That means in 2014 you can earn up to $40,080 between January and the month you turn 66 (for you August). Since you earn $62,000 per year you will definitely NOT earn more than $40,080 by August 1st so you are eligible to collect Social Security in 2014 without an earnings penalty.

I recommend collecting Social Security as early as possible because you only collect Social Security in the months you are alive. I cannot predict how long you will be here, so I recommend collecting as early as possible.

With the previously illustrated case, let’s run some numbers (I have made up the numbers to illustrate the math in this decision). If you wait to sign up for Social Security, you would collect $1,500 monthly if you waited for full retirement age (the month you turn 66). If you begin collecting in January of 2014, you will instead receive $1,400 monthly in 2014. So beginning in 2014 you will receive 6 months at $1,400 giving you a total of $8,400 by August. That means on August 1st you have a bank account with $8,400 in it. If you had waited until August to get your first check that bank account would be empty, but you would start getting $1,500 per month deposited. So if we collect early and then “pay ourselves back” at $100 per month it would take 84 months to deplete that account. That is 7 years. Now since I cannot predict how long you will live, I recommend collecting early. To pay yourself back would take until you turned 73 years old. My dad died when he was 73 years old.

Now if you live to age 85 that may not have been a mathematical win for you. But you had the money when you were younger and probably able to do more. Most 65 year olds are more active than 85 year olds. You also have the possibility to invest that money in a way that you want to invest it. Save it, travel with it, go out to eat, whatever sounds like a good idea for you.

Obviously, I cannot predict when you will die. I do believe that having money now is better than having a little more money later. Obviously not everyone agrees with me. I don’t think you need to agree with me. I am simply explaining why I recommend collecting Social Security Benefits as early as is financially responsible to do so.

The www.ssa.gov website has a really great estimator tool you can use to estimate your retirement and income differences.

There is also a brochure called “When to Start Receiving Retirement Benefits” available from Social Security. This brochure can’t illustrate your math, but it does go into some of the other considerations for deciding when to begin collecting Social Security.

If you want further information on this or any topic relating to Social Security you can do so at any time by contacting SSA either at the website, www.ssa.gov or the toll free national number of 1-800-772-1213 or the Local SSA office at 321 Hazeltine Ave. Jamestown (their number is 1-877-319-3079). The Dunkirk SSA office is at 437 Main St. Suite 2 Dunkirk (their number is 1-888-862-2139).