Social Security: When to Start Benefits

By Grace W. Weinstein

Social security retirement benefits can start as early as age 62 or as late as age 70. It's your choice.

If your "normal" retirement age under Social Security is 65—as it is for everyone born before 1938—then the full benefit available at 65 is reduced by 20 percent if you elect to start at age 62. The adjustment is permanent. You can't change your mind once you start receiving benefits. Delay receipt until age 70, on the other hand, and your monthly checks will be larger.

If you need the money, of course, you will want to begin receiving benefits as soon as possible. If you have other sources of income, you may want to wait in the interest of receiving more money each month.

How to decide? There are two major factors to consider.

If you are under age 65 and plan to continue working after you start receiving benefits, those benefits will be reduced by $1 for every $2 you earn over $11,520 (in 2003; the amount is adjusted each year). You will also have to continue paying the FICA taxes that fund Social Security.

But the more important factor may be your life expectancy. If you are healthy and come from a long-lived family, you may want to delay payments. If not, you may want to start early.

In fact, since it is impossible to know how long you will live—life expectancy tables notwithstanding—you may want to start benefits as soon as you are eligible. In a CCH publication for accountants, Sidney Kess and Barbara Weltman write that "Generally, it is advisable to start benefits as soon as possible, despite the permanent reduction. It can take more than 15 years for someone who waits until the full retirement age to collect to make up for those lost years of not collecting."

Grace W. Weinstein writes a column for The Financial Times.

Source: CreativeLiving Magazine, Summer 2003, The Northwestern Mutual Life Insurance Company

The information in this article is not intended as legal or tax advice, consult your attorney or tax advisor regarding such matters.