Tips on when to begin collecting Social Security benefits
By Jay Nachman
With retirement, disability and survivor’s benefits, Social Security is one of the most successful anti-poverty programs in the nation’s history. The Social Security Act provides a federally administered system of social insurance for older adults. Social Security is financed through payroll taxes paid by employees and their employers. The act was signed by President Franklin Roosevelt in 1935. Taxes were collected for the first time in January 1937. The first one-time, lump-sum payments were made that same month. Regular ongoing monthly benefits started in January 1940.
Older adults can start receiving Social Security retirement benefits as early as age 62. However, the benefit amount will be reduced by a small percentage for each month if collection starts before full retirement age. For those born after 1960, full retirement age is 67. If someone delays taking benefits past full retirement age, the benefit amount will increase by 8% for each year they delay collection. The maximum retirement age is 70.
When to begin collecting Social Security varies for everyone, according to experts. Certified financial planner Alisa Garnek has advice for couples. “If you are part of a couple, it is a two-part decision, and you shouldn’t just think about yourself,” she said. “What’s important to realize is that when one person passes away, the other one may be eligible for a survivor benefit. I recommend for the higher earner of the couple to wait longer to collect so their benefit is higher. Not only will they receive a higher benefit while they’re living, but ultimately they will pass along that higher benefit to their spouse once they pass away.”
Something else that people may not realize is that if “you are widowed and earning less than $23,400 a year or not working, you could qualify for the survivor benefit as early as age 60,” said Garnek, who works out of Bala Cynwyd, holds a National Social Security Advisor designation and is the Social Security specialist for Beacon Pointe Advisors, a nationwide financial registered investment advisory firm.
As to when to begin taking Social Security benefits, Garnek notes, “the longer you wait, the bigger your benefit will be.” When a person begins taking Social Security early, they take a permanent reduction in benefits. By collecting at age 62, the benefit amount will be 30% less than at full-retirement age of 67.
“If a person needs the money, for example, because they use credit card debt to cover expenses, then it makes sense to collect early,” Garnek said.
Unlike other retirement investments, Social Security is “inflation protected,” Garnek said. Social Security provides a cost-of-living adjustment (COLA) to all those currently collecting, as well as to those 62 and older who will begin collecting in the future.
For recipients of Medicare Part B, Social Security deducts premiums from the checks of people who are covered by the health plan.
Garnek recommends that Social Security recipients have federal taxes withheld from their checks. Anyone with an income of more than $34,000 for a single person or $44,000 for a married couple pays federal tax on 85% of their Social Security benefit.
“I like for people to have federal tax directly withheld from their Social Security payments so they don’t potentially receive an underpayment penalty when tax time comes around,” Garnek said.
The Social Security website, www.ssa.gov, which is also available in Spanish, has links for visitors to check their eligibility for Social Security benefits and has answers to other questions.
Jay Nachman is a freelance writer in Philadelphia who tells stories for a variety of clients.
