The BIG Question of When to Take Social Security Retirement Benefits

As the baby boomer generation ages, the question becomes when to take Social Security Retirement Benefits. 

As I see it, there are basically four options:

    1) You can take early retirement: retire at age 62, which is the earliest age at which you can take Social Security Retirement Benefits. 

   2) You can retire at age 65 when a retiring worker is first eligible for Medicare Insurance Benefits. 

   3) You can take retirement benefits at full retirement age. This would be age 67 years of age if you were born in the year 1960 or after.

   4) You can delay Social Security retirement benefits, and keep working until age 70.

 All of these options have their advantages and disadvantages. Each individual has to consider which option works best for them based on their individual circumstances.

Should I Take Early Retirement?

The first option is taking early retirement.  If you were born in the year 1960 or later, and you take early retirement at age 62, you will only receive 70% of your full Social Security Retirement Benefit amount (the amount you would have received if you had waited until 67 to retire). This financial scenario has its disadvantages for the average worker, but not for everyone.  For example, if you are a government worker, or teacher and will retire with health insurance and a pension, taking early retirement at age 62 might have a minimal negative impact on your finances. Additionally, if your family history indicates a tendency toward early mortality, taking early retirement might be the best option for you. Of course, the ability to maintain or obtain health insurance from a source other than the government (Medicare) is a major consideration.

Should I Retire at Age 65?

For this reason, the second option, taking Social Security Retirement at age 65, might work best for many people. At 65, an older worker becomes eligible for Medicare. This means that you do not have to worry about purchasing basic health insurance (although you may want to purchase supplemental coverage). Age 65 is close enough to full retirement age that you have almost all your earnings credits, so your retirement benefit amount will not be significantly reduced.

On the downside, if you continue working after you turn 65, your monthly retirement benefit could be reduced by the amount of money you are still earning, until you reach full retirement age.  For example, in 2021, the earnings limit for those below full retirement age — but collecting Social Security Retirement — is $18,960.00. This means that for every dollar earned above $18,960.00 your Social Security Retirement benefit decreases by $1.00.  The earnings limit on early retirement recipients varies from year to year. The earnings limit also applies to those who take early retirement at 62 years of age.

Should I Wait Until Full Retirement Age?

For this reason, many workers find the third option — taking Social Security Retirement benefits at full retirement age — to be the best option.  If you were born in 1960 or later, you will reach full retirement at age 67. Waiting until full retirement age has at least two advantages. First, at full retirement age, you receive the entire monthly benefit to which you are entitled based on your earnings record.  Second, your monthly retirement benefits will not be reduced by the wages you earn if you continue working.   

Should I Wait Until I’m 70 to Retire?

The fourth option, delaying retirement until age 70, is a favorite with financial advisors.  The reason for waiting to collect Social Security Retirement until age 70 is that you gain a credit of almost 32% of your monthly benefit (at full retirement). This will be added to your monthly retirement benefit amount. The wisdom is, if you can delay collecting Social Security until age 70, this could be more financially advantageous.

I confess that I have a personal bias against delaying retirement benefits until age 70.  The reason is, when I was 11 years old, my grandmother retired in November of the year she reached full retirement age.  In December, while waiting for that first Social Security check to come, my grandmother had a massive heart attack and died.  She never collected a dime of Social Security Retirement.  I have an emotional aversion to delayed Social Security Retirement until age 70.

But from a more objective perspective, the question concerning delayed retirement is:  Will you live long enough to recoup the monthly benefits you did not collect from ages 67 to 70?  Another question is also an unpleasant one: Will you live to be age 70?

The Covid-19 pandemic, which has seriously impacted those over 65 years of age, may have an impact on your decision. No matter what, your decision is one that must be suited to your individual circumstances.  Your personal financial circumstances, health,  family history, and ability to obtain health insurance from a source other than the government, should be fully considered.  Only after weighing all these factors can this important decision be made.

 If you have further questions and wish to discuss, contact me, Linda F. Gerencser, Esquire at Pyfer Reese Straub Gray & Farhat, PC. I can be reached at 717-299-7342.