How to earn the most income from Social Security benefits

Wait until you are 70 years of age, or choose to begin receiving benefits at 62. Photo: Social Security Check

WASHINGTON, September 7, 2013 — There are three choices you can take when it comes to availing yourself of your Social Security benefits.

You can claim them early, you can receive them at your retirement, or you can take them at a later time. You can wait until you are 70 years of age; or you can choose to begin receiving your benefits at 62, if you are disabled or if you are the surviving spouse of someone who was eligible.

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Given these alternatives, when is the best time to begin receiving your Social Security benefits?

Before you think about the best time, keep in mind these guidelines to whether you should begin receiving your Social Security benefits earlier or later.

The Normal Retirement Age

The Normal Retirement age (NRA) or also known as the full retirement age is the time when you can now receive the full benefits of your Social Security. The NRA used to be 65 years old for everyone.

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However under the present law, 2002 is the last year when everyone could receive their full benefits at 65 years of age. Now the age at which you can begin to receive your benefits is based on the year you were born.

For example, if you wereborn in 1938, your normal retirement age is 65 years and two months of age. If you were born later than 1938, your NRA is older completely dependent on your birth year.

This chart from the Social Security Administration explains at what age you can take the full advantage of your Social Security benefits.

Month You Were Born                    Your NRA

1937/earlier                                 65
1938                                                65 and 2 months
1939                                                65 and 4 months
1940                                                65 and 6 months
1941                                                65 and 8 months
1942                                                65 and 10 months
1943-54                                           66
1955                                                66 and 2 months
1956                                                66 and 4 months
1957                                                66 and 6 months
1958                                                66 and 8 months
1959                                                66 and 10 months
1960/later                                        67


Penalty for Starting Early

So what is the importance of Social Security and its benefits? Well when you begin receiving your Social Security benefits prior to your normal retirement age your benefits are reduced by five-ninths of 1% for each month before your NRA. These reduced benefits can continue for up to 36 months.

If you begin receiving your benefits more than 36 months before your normal retirement age, your benefits will be reduced even further - by five-twelfths of 1% per month.

For instance, if your normal retirement age is 66 and you take your benefits when you are just 62 years old, there will be approximately 48 months of decreased benefits. For the first 36 months, the decrease is five-ninths of 1% times 36, or 20%. The decrease for the rest of the months (12 months) is around five-twelfths of 1% times 12, or 5%.

So in total you are receiving reduced benefits at around 25%.

Extra Credit for Delaying Benefits

On the other hand if you decide to wait before you begin receiving your Social Security benefits, you get extra credit. This is one example of the importance of Social Security.

For example should you desire to retire between your normal retirement age of 66 years old and 70 years old (around 68 years old), you get a credit of at least 8% for those two years which means that you get an additional benefit of 16% higher than you would have received had you taken your Social Security benefits at 66 years of age.

For more references on the right age for retirement for you, you can check your Social Security statement which enumerates the projected benefits until you are age 62 and your NRA until you reach the age of 70 years old.

You can also request a copy of your annual statement from the Social Security Administration should you desire one. It’s really hard to wait but if you know that there is going to be an added benefit for waiting you may find it worth the wait.

The Factors to Consider

Once you realize the importance of Social Security benefits, here are a few more factors to consider before receiving your benefits prior to your normal retirement age.

  • The Need for Cash: If you have sufficient cash when you retire, you might consider being flexible with your Social Security benefits and waiting. However if you really can’t make ends meet, try to at least delay the receipt of your benefit until your normal retirement age. In the long run you’ll get more when you wait.
  • Do a Credit Check: This may seem strange, but doing a credit check may help you determine how long you can truly wait to take you benefits. Keep in mind that the longer you wait, the more you will receive from Social Security. 

While you wait, especially if you are still working, try to pay down your debts, so when you do start receiving your benefits – the amount will go further if you don’t have lots of loans and credit card balances to pay.
  • When You are Working: If you take your benefits before your NRA and you are still working, this can also reduce your benefit. For example, $1 gets deducted from your benefits when you earn at least $2 above the annual limit ($15,120 in 2013).



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Joy Mali

Joy Mali is an active finance writer who shares financial management tips that educate people about how important their credit is for living a successful life. Joy has also written for the Examiner and Yahoo Voices about unique methods of earning money and credit management.

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