According to the Social Security Administration, 71 percent of unmarried seniors and 48 percent of senior couples rely on Social Security benefits for at least 50 percent of their income after retirement. Whether you’re set up to support yourself through retirement or you’ll be relying heavily on Social Security, you probably want to get as much as you can out of this social insurance program. The first step in doing that is determining the right time to start taking it.
If you’ve paid any attention to the Social Security statement you occasionally get in the mail, then you probably know you can start taking payments at age 62. But if you’ve looked at the amount you’ll get when you choose this option and compared it to what you’d get if you chose to wait until full retirement age, then you also realize you’ll be committing to an extreme cut in benefits if you do.
While no one can say definitively how long they will live, you can look at likely break-even points—which are the ages at which you will have taken more out of Social Security than you put in—and determine which ones seem reasonable according to your health history and health maintenance.
Also, while aiming for full retirement age is usually a good idea, you can also push it and wait until age 68, 69, or 70 and gain even more in your lifetime monthly payments.
Social Security benefits can be taxable, which is something you need to be concerned about both if you plan to work part time after retirement and if you plan to take taxable distributions from retirement accounts. Social Security looks at your adjusted gross income to determine your provisional income. If your provisional income meets a certain threshold ($25,000 for single filers and $32,000 for married joint filers in 2017) then 50 to 85 percent of your Social Security income may be taxed at regular income tax rates.
There are a variety of claiming options available to those who qualify for Social Security benefits. Depending on your situations, you may be able to choose to do any one of the following:
Generally, you want to look at the financial impact of each of these choices and choose the one that nets you the largest overall benefit.
In the final volume of the POSTRETIREMENT BENEFITS PLANNING series, we will discuss medicare benefits, the two main coverage options and the differences between them.