Half Of All Eligible Americans Are Filing For Social Security
According to recent studies, half of all eligible Americans, apparently worried about the future of social security or the current economy, are filing for social security at the earliest they can, namely 62 years of age.
Filing Early Could Be A Mistake
This is likely to be a mistake for many of them because they will be giving up thousands of dollars of benefits they would otherwise receive if they waited until age 66 or 70.
Social security retirement benefits are not the same for everyone who qualifies. Benefits can depend on the applicant’s age, amounts the applicant paid in, marital status and other factors.
The best advice is to take a deep breath and don’t rush into filing without analyzing all the facts that determine your benefits. Let’s look at a few examples.
Scenario #1: Herb and Alice wanted to retire as young as possible. They both filed at age 62. Over the course of their retirement they will lose over $70,000 of net benefits that they would have enjoyed if they had waited till age 66 or 70.
Scenario #2: Herb decides a year after filing to go back to his old job that earns him $20,000 part time. Now Herb has the worst of both worlds because he is locked into the lowered benefits of his filing date (unless he repays the benefits he already received) and he will forfeit one-half of his current monthly social security benefits. A very ugly situation.
Scenario #3: John and Mary are married when he is 54 and she is 52. It is the second marriage for each and John has custody of two minor children from his first marriage. They agree that Mary should quit the job she had for 20 years to stay home to care for the kids. When Mary applies for social security ten years later she may be refused or receive less benefits due to her lack of recent quarters of coverage (QC’s).
These scenarios do not apply in all cases and may depend on additional factors. The point, however, is that before you make a significant change in your employment status or consider filing for social security retirement, you should investigate what your decision will have on your eligibility for benefits.
Typically the choices for filing for social security are at age 62, age 66 (for persons born between 1943 and 1954) and age 70. Also husband and wife can select different filing ages. Each choice has its own advantages and disadvantages.
Fortunately there are some very good resources online to help you and your spouse make your decisions.
The best tool by far is the Social Security Relevant Benefit Calculator. It is an interactive website that allows you to enter your personal data and discover what your benefits will be under different scenarios. You can access it at www.socialsecurity.gov/estimator
If you want more detailed technical information about eligibility, you can obtain the social security handbook at the Social Security website as well.
Boston College’s Center for Retirement Research has an ebook written in layperson’s language titled “Social Security Claiming Guide” at http://www.crr.bc.edu.
The contents of this article are for information only and is not to be interpreted as legal advice. For personal legal advice you should consult with an attorney who is experienced in probate law or estate planning. The U.S. Treasury Department requires us to advise you that any written tax advice cannot be used and is not intended to be used by any taxpayer for the purpose of avoiding any penalties that may be imposed under the Internal Revenue Code. Written advice from our firm relating to any Federal Tax matters may not, without our express written consent, be used in promoting, marketing or recommending any entity, investment plan or arrangement to any taxpayer.