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Elder Law Certified Lawyer | Estate Plan and Tax Plan | Business Law

I recently attended a seminar on Social Security benefits.  It really struck me how little many people know about a benefit most of us pay for out of every hard earned paycheck we receive.  Most people approaching retirement age likely know that at 62 they are eligible to begin receiving social security benefits.  But, what if you were to wait until 66, 67 or even 70?  Would you be surprised to know that your monthly benefit could almost double?  Yes, holding off on collecting that social security check could result in you receiving tens of thousands of dollars more over the rest of your lifetime.

Currently, individuals are allowed to begin receiving Social Security benefits at age 62.  Age 62, however, is not “full retirement age.”  For those of us not there yet, full retirement age is between 66 and 67 depending on your date of birth.  Until you reach this age, you do not qualify for all of your earned benefits.  If an individual chooses to begin taking social security benefits prior to reaching full retirement age, the amount of the benefit is reduced.  Taking benefits at age 62 reduces the benefit you would receive at full retirement age by approximately 25%.  Also, if you are still working and are not full retirement age, for every $2.00 you earn above the annual limit, your benefits will be reduced by $1.00.

For many individuals, the more important consideration is whether you will live long enough for the wait to actually pay off.  You have to live long enough to make-up the benefits you sacrificed in order to hold out for the larger payout.  Waiting to receive the benefits may be more lucrative, but may not be the best option for everyone.  For example, some need the benefits sooner because their savings are not enough alone to get them to full retirement age without working, which may no longer be an option.  This is a decision to be made carefully and with a lot of forethought and planning.

Similar to the individual’s web of contemplations in determining the sweet spot for beginning to take social security benefits, married couples, surviving spouses, and divorced individuals also have several strategies to consider when deciding how to receive the most of the available social security benefits.  For example, couples can plan and coordinate when and how they will take the available benefits in order to receive the highest amount possible.  By way of example: Susan, a lifelong homemaker and spouse, cannot draw spousal benefits until her husband Bill, the working spouse, applies for retirement benefits.  In order to prevent Bill from reducing his benefits unnecessarily, Bill can apply for benefits and then request the payments be suspended.  This strategy allows Susan to receive spousal benefits and allows Bill to continue earning a higher amount of benefits when he finally does decide to retire.  This is just one example of the strategies to be considered in order to maximize your social security benefits.

So, don’t leave money on the table.  Plan ahead and understand the benefits to which you are entitled.  You have worked hard to pay into social security for years, so make social security work hard for you during your well-deserved retirement!