ALBUQUERQUE, N.M. — With hundreds of possible options available, it’s no wonder boomers and seniors are overwhelmed by the question of when to start drawing their Social Security benefits.
There is no one right answer for everyone, but experts do recommend first considering your health and financial situation as you decide what the best age is to maximize lifetime benefits.
“There are about 700 options so it can be a little overwhelming,” says Lynn B. Thurgood, founder of Oxford Wealth Advisors LLC in Rio Rancho.
– Social Security Administration workers can answer factual questions but not give advice. 800-772-1213. The agency website, www.socialsecurity.gov, has benefit planners, questions and answers and webinars.
– The NOLO book “Social Security, Medicare and Government Pensions.”
– Free educational seminars such as those offered by Oxford Wealth Advisors. For information, call 800-955-6519.
There are many complexities, including whether you plan to work in retirement and how best to provide for your spouse.
“There’s nothing written in stone as to when is a best time,” says Ray Vigil, public affairs specialist for the Social Security Administration in El Paso. “It gets very complicated because there are a lot of what-if scenarios. … It’s a very personal decision.”
Retirees can begin collecting Social Security benefits at age 62, but their checks will be permanently reduced by 25 percent to account for the longer time period they will be getting payments. By waiting to full retirement age – 66 for those born between 1943 and 1954 – they will get their full benefit. And, for every year past full retirement age they delay taking benefits, their payments will go up 8 percent to a maximum 32 percent at age 70.
The first thing to consider is your expected lifespan based on family history and your current health, experts agree.
“Do you think you have a long life expectancy or are you afraid of outliving your money?” asks Jennifer Cole, a certified financial planner and president of Cole Financial Consulting LLC in Sandia Park. “If you live longer than average, you’re going to get more by waiting. If you have health issues, that might not be the best strategy.”
About one out of every four 65-year-olds will live past age 90, and one out of 10 will live past age 95, according to the Social Security Administration.
“A lot of people underestimate their longevity,” Cole says.
The next question to consider is your current financial needs and whether you have the resources to delay Social Security until full retirement age or even until age 70.
“We typically do not start at age 62 unless you absolutely need the money right now or unless you have a significant health concern,” says Thurgood, who is president of the central New Mexico chapter of the Society for Financial Awareness.
He says people should not be scared into taking their benefits early because of fears the Social Security system is going broke.
“Don’t panic! It’s causing a lot of people to make very poor decisions,” he says. “They’re not going to mess with the baby boomers and people already receiving benefits. … Where reform will occur is in the younger folks and I think that’s a definite. They’ll increase the retirement age. They’ll increase the income ceiling.”
Instead, it’s best to use taxable assets such as pensions and 401K accounts now while tax rates are at historic lows. Social Security benefits are never fully taxable, Thurgood says.
What if …
One common scenario involves a married couple in which the husband has higher lifetime earnings than his wife. Often, the wife will file for benefits at full retirement age while the husband post-pones his benefits until age 70. In the meantime, though, he can collect spousal benefits equal to half of what his wife is getting, says certified financial planner Jennifer Cole.
♦ The needs of your spouse. If a principal wage earner starts taking benefits early at a reduced rate, his or her spouse also will be locked into the lower amount for a survivor’s benefit after death, says Ray Vigil of the Social Security Administration.
♦ Whether you will continue working. Most people under full retirement age can earn up to $15,120 without it affecting their retirement benefits. For every $2 over the limit, Social Security benefits will be reduced by $1. In the year someone reaches full retirement age, they can earn up to $40,080, with no restrictions after that, Vigil says.
♦ Whether to take spousal benefits. At full retirement age, spouses can choose between their own benefits or half that of their spouse. Between 62 and full retirement age, a spousal benefit is only available to people whose own benefit is less than half of their spouse’s benefit. In addition, most people who have been married at least 10 years and then divorced but not remarried also are eligible for spousal benefits, Vigil says.
There are several other complexities. For example, if children are minors when either of their parents begins getting benefits, they can collect, too. People who have worked for government agencies that don’t pay into Social Security will have a government pension offset.
Lynn B. Thurgood of Oxford Wealth Advisors also warns people should make sure they are getting advice from someone familiar with Social Security.