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Is it a good idea to begin collecting your Social Security benefits as soon as you qualify at age 62 or should you wait until you’re 70 years of age when you could qualify for higher payments? Financial advisors do not agree on the answer.
At first review, waiting seems like the best choice. Waiting to collect until the age of 70 qualifies a recipient to receive an additional 8% per year for every year past the “full” retirement age of 66 or 67, depending on where a person was born. The average benefit collected by a 62-year-old in 2012 was less than $12,500 a year. But waiting until age 70 to collect could make the annual payments more than $30,000 a year.
Social Security benefits are calculated on a number of factors including lifetime earnings, average life expectancy at the age benefits are taken, marital status and more. The Social Security Administration reports that a person aged 65 years old today can expect to live to age 84 if a man or 86 if a woman. Waiting to collect benefits provides a great monthly benefit which may bring peace of mind long term.
However, today’s economy has made it extremely difficult for many Americans to meet their current monthly expenses and, at age 62, there may be no other option than to seek the relief of Social Security benefits.
Some advisors say the only time it makes sense to wait to collect until you’re 70 years old is if you’re still earning a decent wage and have a healthy retirement portfolio. They point to low retirement savings, more active and expensive senior lifestyles, longer life spans and, increasingly, tax issues as reasons to begin collecting benefits as soon as you qualify.
Other experts reason that waiting means you’ll be living off your portfolios. That decreases the amount you may leave to children or charity. Any savings you used by waiting decreases the amount you have in your account that can grow, meaning less cash will be available in those accounts in later years. Benefits may be more per month if you wait, but when you die, those benefits cannot be passed on to a spouse.
Decisions about Social Security are extremely important especially during today’s uncertain economic times. Contact us at McRuer CPAs and we’ll review your retirement plans with you to help you determine the best strategy for the years ahead.
