VIDEO: When Should You Collect Your Social Security Benefit?

By Joe Dowdall, CFP®, RICP®, CRPC®, CCFC

The years leading up to retirement can be exciting but overwhelming. There’s a lot to do to prepare for this next chapter of life, including learning about your Social Security benefits. This video guide can help you understand how your benefits work, how to maximize them, and, most importantly, when to collect your benefits.

Transcript

Understanding Social Security: Key Information for Retirement Planning

Hi, my name is Joe Dowdall, and I am a retirement planner at Worth Asset Management. At Worth Asset Management, I have the opportunity to create personalized retirement plans for individuals nearing or already in retirement. One of the most common questions I receive is about Social Security and the timing of when to collect benefits. Today, I’d like to share some insights on how Social Security benefits are calculated and discuss when the optimal time to begin receiving them might be.

How Your Social Security Benefit is Calculated

Your Social Security benefit amount is based on your highest 35 years of earnings. If you worked less than 35 years, the missing years will be counted as zeros, which can reduce your benefit. Therefore, having a full 35 years of work is ideal for maximizing your benefit.

Once your earnings over those 35 years are calculated, Social Security applies a special formula to determine your Primary Insurance Amount (PIA). This amount is the benefit you would receive at your Full Retirement Age (FRA), which varies depending on your birth year.

Cost-of-Living Adjustments (COLA) for Social Security

The Social Security Administration occasionally applies Cost-of-Living Adjustments (COLA) to benefits, especially during periods of high inflation. As a result, if you are already receiving Social Security or will begin receiving it in the future, your benefit amount may increase due to COLA adjustments.

Understanding Your Full Retirement Age (FRA)

Your Full Retirement Age is the age at which you are entitled to receive your Primary Insurance Amount. This age depends on the year you were born:

  • If born before 1954, your FRA is 66.
  • If born in 1960 or later, your FRA is 67.

There are specific formulas for those born between 1954 and 1960 that determine your FRA.

When to Collect Social Security Benefits

While your Full Retirement Age determines when you are eligible for your full benefit, you have flexibility in deciding when to start collecting. You can begin receiving benefits anytime between age 62 and 70. However, collecting before your Full Retirement Age will result in a reduced benefit, while delaying benefits past your Full Retirement Age can increase your monthly amount.

By waiting until age 70, your benefit could increase by as much as 32%. This means if you hold off collecting until age 70, your monthly amount could be significantly higher than if you start at 62 or your FRA.

Factors to Consider When Deciding When to Collect Benefits

There are three key factors to consider when deciding the best time to collect your Social Security benefits:

  1. Need: If you need the income to cover expenses, you may choose to collect earlier.
  2. Health: If you expect to live longer than average (beyond your mid-80s), delaying your benefits might be a good strategy, as it could result in higher lifetime benefits.
  3. Emotion: Sometimes, the decision to collect early or delay can come down to how you feel about your financial situation. Many clients have emotional reasons for deciding whether to collect early or wait for a larger monthly benefit.

How to Find Your Social Security Benefit Amount

You can determine your estimated Social Security benefit by reviewing your Social Security statement. If you’re 60 or older and not yet receiving benefits, the Social Security Administration will mail this statement to you. Alternatively, if you have an online account with the SSA, you can log in to see your benefit amount.

It’s also essential to review your work history on the statement, as the Social Security Administration can make mistakes in recording income. If errors are found, it could result in a reduced benefit, so verifying your earnings is important.

Impact of Marriage on Social Security Benefits

Married couples face additional decisions when it comes to collecting Social Security. If one spouse was the primary wage earner and the other had a lower income or fewer work years, the lower-earning spouse may be eligible for a spousal benefit. The spousal benefit is typically equal to half of the higher-earning spouse’s Full Retirement Age benefit.

For divorced individuals, if you were married for over 10 years and have been divorced for more than two years, you can collect a benefit based on your ex-spouse’s work record, as long as you haven’t remarried. Unlike married couples, divorced individuals do not have to wait for their ex-spouse to begin collecting to receive benefits.

Why It’s Important to Work With a Professional

The decision about when to start Social Security is complex and influenced by many factors. While there are online calculators, the variables involved—such as health, need, emotional considerations, and marital status—make it a highly personalized choice.

This is why working with a professional, like myself, who has helped hundreds of people navigate these decisions, can be invaluable. If you’d like to discuss your specific situation and determine the right time for you to begin collecting Social Security, feel free to reach out. There’s no cost or obligation.

Thank you, and I look forward to helping you make the best decision for your retirement. Have a great day!