What is My Full Retirement Age?
When you take out social security, your benefits are a combination of 3 types of benefits: retirement benefit, spousal benefit and survivor benefit. Different claiming strategies affect the age you can retire, as well as penalties. The reason financial planners talk so much about full retirement age, is that you no longer pay a penalty or delay credit when you retire at this age. It isn’t the most profitable age to retire, but it is more profitable than retiring early with penalties. Your full retirement age is based on the year you were born and is changed at liberty of the Social Security Administration. It can be as low as 60, if claiming under survivor benefits, or as high as 62.
When to Claim Social Security
If you claim social security when you first get the chance, you leave behind a substantial financial opportunity. Social Security benefits are indexed based on your age at retirement and you can earn more money, if you wait until your full retirement age. As a rule of thumb, some advisers recommend that you claim between your full retirement age and age 70, because this period provides higher returns and gives retirees options to fit their respective lifestyles. Age 70 is the golden age for any plan, because your social security benefits are the highest and they decrease from age 71 onward. Social Security is structured this way, because earlier claiming strategies give the retiree benefits for a longer period of time. By waiting, Social Security obliges you a larger pay out in the future.
Is it Worth the Wait for Larger Social Security Benefits?
Usually, it is well worth the wait, but you may want to consider your medical history before choosing to claim benefits at age 70. A late claiming strategy is only useful for people that get to use the money and have the financial means to wait before claiming their benefits. If you wait for age 70 to claim social security, it will take until age 79 to earn more than an early claiming strategy. If you expect to live into your 80s, then waiting until 70 to claim social security benefits will give you the highest payout.
But What About My Job?
You don’t have to quit working in order to claim social security benefits. To qualify on your own, you only need to work for 40 quarters (about 10 years). You can also claim social security as a spouse or a survivor of a deceased relative, but regardless of the claiming strategy, you will not be penalized for working after you claim social security benefits.
Should I Adapt My Retirement Strategy?
We hope that this article helped clarify social security claiming strategies for you. We believe that your retirement plan should always be customized based on your financial needs and personal desires. We want to help you in any way possible, but due to legal liabilities of the SEC, we can only provide financial advice during an in-person meeting. Please schedule a free consultation with us for help with your retirement planning strategy.