Lately in the news and personally I have heard the questions, “When is the best time to collect Social Security?” “How can I maximize the amount I can receive?” “Will I get penalized if I collect or withdraw on it too early?” Now, while there may not be an exact answer for everyone, since everyones situation is different, there sure are procedures you can follow that will help guide you to receiving the highest return that will also fit your needs. Let’s take a look on how Social Security works first.
The basics of social security
Most people are eligible to start collecting at the age of 62. But if you wait until your Full Retirement Age, which according to the Social Security Administration is 66, you will receive a much larger benefit. Keep in mind that while 66 is your Full Retirement Age, you are able to wait until age 70 to collect. I know that may sound confusing but in general your benefits continue to increase until age 70. Then, the SSA requires you to start collecting. In other words, collecting early provides a smaller payment over a longer period of time. Collecting later will provide a larger payment over a shorter period of time. Understanding the numbers behind collecting at certain ages is where you can really benefit from.
how the numbers work
A study conducted by Stanford University has identified a few conditions that conclude delaying to collect is the best when:
- Interest Rates Are Low
- Married Couples v Single Persons
- Single Women v Single Men
- Multiple Earning Couples
Currently interest rates are still at all time lows. The reason why this makes it more beneficial to delay is because you will not be able to gain much, if any, from saving your collection yourself. If interest rates were high it would be assumed that you could invest your collections and that interest would outnumber the benefits of waiting. Married couples have the ability to collect ones earnings early to live off of and delay the others. This helps if income is needed currently to help with living expenses. Lastly, the benefit of being a single woman and delaying to collect is strictly based of the statistics that women have the tendency to outlive men.
What is your life expectancy?
According to the Social Security Administration, the typical 65-year-old today will live to age 83, one in four will live to age 90, and one in ten will live to 95. While there are many other factors that influence this statistic to go in either direction, this is a baseline for you to determine where you may stand. Below is a chart with an analysis that breaks down exactly where you stand with benefits as it relates to your age. Meaning, if you delay to collect how long it takes for your benefits to start to increase your overall compensation.
As you can see by the chart, delaying to collect can result in a large benefit increase. While I am not a financial advisor nor a government official who works for the Social Security Administration, I do suggest that everyone take time to thoroughly discuss and go over your options with a licensed financial advisor. This article is based off of statistics and research.
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