If you are getting close to retirement age, you have a number of important decisions you will need to make in the near future if you have not yet made them. Will you relocate to a new state or even country when you retire or remain where you are? Should you downsize or buy your dream house for your “Golden Years?” Is now the time to cash in on long-term investments or should you hold onto them for a while longer? One of the most important of these decisions, however, is whether you should delay your Social security retirement benefits. The Lincolnshire elder law attorneys at Hedeker Law, Ltd. offer some insight into the advantages and disadvantages of delaying your Social Security retirement benefits.
Social Security Retirement System Basics
Social Security was established in 1935 by the Social Security Act. Prior to the establishment of the Social Security system, support for the elderly was undertaken primarily by families. The Social Security retirement program is based on contributions workers make into the system. While you are employed, you pay into Social Security and then you receive benefits later on, when it’s your turn to retire. On your paycheck, the contributions will appear as the Federal Insurance Contributions Act (FICA) taxes.
You accumulate credits based on your earnings throughout the course of your working years. The amount you need to earn to accumulate a credit has increased over the years to keep up with inflation. For example, for 2018, you get one credit for every $1,320 you earn, up to a limit of four credits per year. Once a credit is earned it remains on your record forever. If you were born after 1929, you need 40 credits in order to receive Social Security retirement benefits. Therefore, you must work at least ten years over the course of your lifetime to be eligible for Social Security retirement benefits.
There are several factors that will go into determining how much your benefit amount will be each month when you start collecting your benefits. If you want to know now how much you have paid in to date and/or what your benefit will be, you can get an estimate at any time. The Social Security Administration (SSA) mails out a summary of your benefits each year, about three months before your birthday. In addition, you can request one by calling the SSA (800-772-1213) and asking for a form SSA-7004, or you can download the form from the SSA website. Your statement provides a record of your earnings history, the number of credits you’ve accumulated to date, and an estimate of the retirement benefits available if you wait until full retirement age. The Retirement Estimator tool, which can be found on the SSA website, allows you to estimate your benefit amount using figures your input.
When Am I Eligible to Start Collecting Social Security Retirement Benefits?
You are free to retire at any age; however, you are not eligible to begin collecting Social Security retirement benefits until you reach age 62. Furthermore, the latest you can begin collecting your benefits is age 70. Since you may start collecting benefits at any time within that eight year span, it is prudent to know what the advantages and disadvantages are of starting early or delaying your Social Security retirement benefits.
Should I Start Receiving My Social Security Retirement Benefits at Age 62 or Delay them until I’m Older?
Why would you delay your benefits if you are eligible to be them at age 62? The simple answer is that your monthly benefit amount will be larger if you choose to delay the start of your Social Security retirement benefits. If you wish to receive your “full” retirement benefits you will probably need to wait until age 67 to start collecting benefits. Until 1983, full retirement age was 65; however, that year Congress voted to raise it to 67 for everyone born in 1960 or later. If you were born between 1938 and 1960, full retirement age varies depending on what year you were born so you will need to check the Social Security Administration’s website to be certain.
In general, the benefit to delaying the start of your Social Security retirement benefits is that you will receive a larger monthly benefit amount by doing so. Calculating exactly how much more can be complicated though. By way of illustration, if you were born between 1943 and 1954, your monthly benefit amount will be reduced 25 percent if you start collecting your retirement benefits at age 62 and will remain at that reduced rate for the rest of your life. On the other hand, your monthly benefits will increase 8 percent for every year that you delay the start of your benefits up to age 70. Therefore, if you were born after 1960, and you wait until age 70 to begin collecting your retirement benefits, your monthly benefit amount will be 24 (0.08% x 3) percent greater than if you had started collecting benefits at your “full retirement age” of 65.
Contact Lincolnshire Elder Law Attorneys
For additional information, please join us for an upcoming FREE seminar. If you have additional questions or concerns regarding your Social Security retirement benefits, contact the experienced Lincolnshire elder law attorneys at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.