|I am in my early sixties and starting to seriously think about retirement. I have money in a corporate retirement plan and other savings but want to understand more about retirement benefits from Social Security.
Congratulations on starting to think about the financial aspects of retirement. Once you are no longer earning wages, your retirement income will consist of three items – income from your retirement plan, income from your savings and retirement benefits from Social Security. You have control over the first two sources, but you have few choices for Social Security retirement benefits. In fact, since your level of benefits is based on your income history, the only choice you have for Social Security is when to start receiving benefits.The answer to that question is not necessarily simple.
There are several factors to consider:
The first two questions are simple. The third question probably depends on your personal financial situation. The fourth question probably does not have an answer.
For 2015, the average monthly benefit for all workers is about $1,300 and the maximum benefit based on the highest earnings is about $2,650. Benefits can increase annually based on cost of living adjustments that have averaged about 2.5% over the past 10 years.
Full Retirement Age
Consider Your Continuing Employment Plans
Once you reach full retirement age, there is an adjustment in calculating the length of early retirement to reflect months when benefits were withheld. However, the actual reduction in benefits due to working is never recovered.
Impact of Starting to Take Benefits Before or After Full Retirement Age
If you delay taking benefits until after full retirement age, there is an 8% increase for each year you delay if you were born in 1943 or later. There are smaller increases if you were born before 1943.
Another way to look at this is to consider what the total benefits would be over your lifetime based on when you started receiving the benefits. This chart assumes a full retirement age of 66 and a monthly benefit of $1000 at full retirement age with no cost of living adjustments.
Everyone should consider their personal and financial situations when deciding when to apply for Social Security retirement benefits. However, there are some general conclusions that may make sense for you.
You should consider this matter carefully and be sure to understand all the implications of when you apply for Social Security benefits. Consider discussing this with your family, representatives from Social Security and your financial advisor.
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