Deciding when you want to start receiving social security is a decision that can have a huge effect on your life. The Social Security Administration (SSA) has set rules about the requirements for receiving benefits. One of the most important requirements is age.
Full retirement age is increasing, and it depends on the year you were born. Due to medical advances, many people are living longer than ever. The full retirement age for those born between 1943 and 1954 is sixty-six. This age increases by two months for those born between 1955 and 1960. So for instance if you were born in 1955, your full retirement age is sixty-six years and two months. If you were born in 1956, it’s sixty-six years and four months, and so on. For those born in 1960 or after, the full retirement age is sixty-seven years.
You may decide to take early retirement as soon as age sixty-two. However, if you choose to go this route, you won’t receive the full benefits. The SSA deducts half a percent from the full amount for the number of months before full retirement age. Therefore, if you choose to retire at sixty-two when your full retirement age is sixty-six, you will lose twenty-five percent of your benefits. In the future, the SSA expects to increase the percentage they deduct from early retirement benefits.
If you prefer to delay your retirement, your benefits will increase by two-thirds of one percent for each month you delay retirement, until you reach the age of seventy or you start receiving benefits. If that happens before you hit seventy, the percentage equals an increase of eight percent per year.
You may be able to increase your social security benefits if you elect to receive them and work past your full retirement age. This gets complicated if you do this before you reach full retirement age, and you earn more than a certain limit set by the SSA. That annual earnings limit keeps changing. In 2016, the limit is $15,720. If you’re receiving benefits and working, and you earn more than this amount, the SSA will deduct half of the extra amount you earn, not including the $15,720, from your benefits. Around the time you reach full retirement age, if you’re still working and receiving benefits, the SSA will deduct a third of the extra amount you earn, and the earnings limit goes up. Then, at full retirement age, the SSA stops taking a percentage out of your benefits, and there’s no longer an earnings limit.
To begin receiving social security benefits, contact the SSA three months beforehand. So for instance, three months before your sixty-fifth birthday, you should contact the SSA to sign up for Medicare benefits. If you want Medicare D, the prescription drug coverage, you will have to opt-in, as those services are optional. You’ll need to provide your social security card and birth certificate, along with another form of identification, for proof of U.S. citizenship. You will also need to provide the SSA with your most recent W-2 or tax return. If you served in the military or are applying for other people to receive your benefits, such as a spouse or child, you will have to provide more documents.
Ultimately, the time you choose to cash in on your social security benefits is up to you. Consider your options carefully and make the right decision for you and your wallet.
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