When to Delay Social Security Benefits

If you’re eligible, 62 is the earliest age you can start receiving Social Security retirement benefits. Although collecting early retirement benefits makes sense for some people, there’s a major drawback to consider: if you start collecting benefits early, your monthly retirement benefit will be permanently reduced by an average of 20% to 30%.

Below are some factors to keep in mind:

Electing to delay benefits

You can elect to delay receiving Social Security retirement benefits until you are past normal retirement age. Your benefit will be increased by the delayed retirement credit. The amount of the increase is based on a predetermined percentage of your primary insurance amount (PIA) for each month you delay receiving benefits up to the max age of 70.

The amount of the credit depends on two factors:

  1. What year you were born
  2. How many months you delayed receiving benefits past normal retirement age

If you were born in 1943 or later, you will receive 2/3 of 1 percent more per month or 8 percent more per year if you delay benefits. For example, if your normal retirement age is 66, and you delay retirement until age 70, your benefit at age 70 will be 32 percent more. Although the delayed retirement credit increases your Social Security benefit, it does not increase your PIA.

When can it be used?

In order to be eligible to receive delayed retirement benefits, you must:

  1. Be at least one month older than normal retirement age, and
  2. Be fully insured for retirement benefits (in most cases have 40 quarters of coverage).

Benefits of delaying

  1. Your earnings after normal retirement age may be substantial enough to increase your average indexed monthly earnings (AIME), upon which your benefit is based.
  2. If you elect to delay, upon your death, your surviving spouse (at normal retirement age) may receive 100 percent of the benefit you were receiving.
  3. When you retire, your family may be eligible to receive benefits based on your PIA, limited to a family maximum. However, if you delay benefits, your credit won’t count toward your family max.

Tradeoffs

  1. Delaying benefits won’t necessarily increase your lifetime retirement benefit. The amount of each check will be higher, but you’ll receive fewer checks than if you began receiving benefits at normal retirement age.
  2. Since the delayed credit doesn’t affect your PIA, benefits paid to family won’t increase (except in the surviving spouse scenario, mentioned above).

How to do it

Compare your options when deciding whether you want to delay receiving benefits. Consider the following:

  • Why do you want to delay receiving benefits?
  • Can you afford to delay receiving benefits, or do you need Social Security retirement income as soon as possible?
  • Do you expect to live long enough to benefit from delaying benefits?
  • How important is it to increase the amount of survivor income available to your spouse?

You can estimate your retirement benefit online using the Retirement Estimator Calculator on the Social Security website at www.ssa.gov.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016.

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