When people plan and invest for retirement, the decision of when
to begin taking Social Security benefits eventually comes up.
Social Security is an important source of retirement income for
many individuals and, therefore, the decision of when to take
these benefits can make a big impact on retirement income.
A retired worker who is fully insured can elect to start receiving
benefits at any time between age 62 and 65 (or even later). Benefits
can start as early as 62, but if you so elect they are permanently
reduced by 20%. Here is where the question arises. Is it better
to start taking checks at a reduced amount or wait until Normal
Retirement Age and receive full benefits? Before addressing the
inherent problems with this empirical question, let's look at
some of the factors and considerations.
The early bird who decides to get the worm first gets three years'
worth of checks -36 payments- that the sleeping bird will never
see. Thus, it will take some time for the total benefits of the
person who waits until age 65 to catch up to those of the early
collector. Further, for those born after 1937, Normal Retirement
Age is being extended. Normal Retirement Age is currently age
65, yet due to the Social Security amendments, full benefit age
will be raised gradually in two stages until eventually reaching
67 in 2027. Thus, the early bird will receive even more checks
than the retiree who bides his time for full benefits. |
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