How do I know at what age to start receiving my Social Security benefit?
This is one of the most common questions that people have that are nearing retirement. If you have ever examined “Your Social Security Statement” prepared specifically for you by the Social Security Administration, you know there are three different figures that show up for your retirement amount, based on the age that you decide to start receiving your benefit—before full retirement age, at full retirement age, or after full retirement age.

What is full retirement age?

• Born 1937 or before that, full retirement age is 65.
• Born 1943-1954, full retirement age is 66.
• Born 1960 and later, full retirement age of 67.

A detailed chart can be found at SSA.gov for further reference.

What is the best age to start receiving my Social Security benefit?
To calculate the age at which one should start receiving their Social Security Benefit, it takes a bit of math in order to calculate the breakeven point. If we calculate the breakeven point, we can tell how long it will take before all benefits are equal. From this point on, we can tell which age would be the most beneficial. Each individual’s situation is unique and needs to be calculated based on those circumstances. While other factors may be considerations as to when to start receiving the benefit, such as potential pension income, 401k, or IRA income, this example will only look at the social security benefit alone.

Hypothetical Scenario:
Early retirement, age 62……………..benefit $600 a month
Full retirement, age 67………………..benefit $900 a month
After retirement, age 70………………benefit $1100 a month

The first breakeven point that we reach is at age 77. At this point, if you had started receiving benefit at early retirement age of 62 or waited until age 67, you have received an equal amount of benefit payments, in this case the total amount of payments would be $108,000. This means that any payment the recipient receives after turning age 77, it would have beneficial to wait until age 67 to collect social security because that is a higher payment than if they had started at age 62. From this point on, the best option is the benefit payment starting at age 67, until the recipient would reach age 83.5, at which point, we reach another breakeven amount. At age 83.5, the total amount of payments for starting to collect social security at age 67 or age 70 both total payments of $178,200. Beyond this point, the best option, the one that yields the highest total amount of benefit for the recipient, is to have waited to collect until age 70.

Considerations to take into account when deciding to collect
Obviously, no one know exactly how long they are going to live and be able to collect benefits, so this factor is always going to be an unknown. Each person’s situation is different, so the time that is best to start collecting your social security will be individually based. Probably the biggest factor to consider is the current financial situation at each retirement age—early, full, late. For example, if you are still working and don’t really need the income at early retirement, it may make sense to wait until full retirement age to collect a higher amount once you do actually retire. Talking with your tax accountant or financial advisor—along with your spouse or other family members—regarding these choices, to determine your specific needs will enable you to make the most informed decision possible.

*The scenario used in this article is for illustration purposes only and is no indication of advice for a specific situation.

This article was previously published on my Examiner Personal Finance Page.