Elder Couple with Bills

So, you’ve reached your FRA. However, is this the right time to file or should you delay benefits?

Social Security has more than 62 million people receiving benefits, making it one of the most popular social benefit programs in the country, according to The Crozet Gazette in “When Should I Start Taking My Social Security Checks?“. However, while the programs are used by millions of Americans, the key for each recipient is to know the best time to file.

Over the years of working and paying taxes into the system, a working person receives a monthly benefit for life, with a COLA (Cost of Living Adjustment) being the only adjustment. Forty “work credits” are needed to be eligible for the program, which is about 10 years of work for most people. Benefits vary, depending upon the earnings of the individual and the number of years they paid into the system. The maximum benefit in 2019 would be $3,770 per month, although most payments range from $800 to $2,400, according to the Social Security Administration.

To receive the full amount, the worker must wait until FRA (Full Retirement Age) to collect benefits. FRA depends upon your year of birth. However, workers can take benefits as early as age 62 or as late as age 70. If benefits are taken early, the monthly amount is lower, and that can not change. The later benefits are claimed, the higher the monthly benefit will be.

The question to which there is no single answer is when to start collecting benefits.

The first issue is if the person needs income and there are no other sources. Many people begin collecting Social Security early, because of unwanted early retirement. They are let go from their jobs and have a hard time finding another position. Another consideration is health. If someone has a chronic illness or a serious illness and they don’t expect to live a long time, it makes sense to take the money earlier.

What most people are looking for when they ask about the timing of benefits is a “break even” age. However, that is an inexact science. Unexpected events happen, so while the numbers may work at one point in time, life circumstances may happen, which makes those numbers useless.

Keep in mind that Social Security benefits may be taxable. Therefore, if you are still working, it makes sense to delay taking benefits

There are varying opinions on what the future of Social Security will look like. In fact, 2018 was the first year since the 1980s when the program paid out more in benefits than it received in tax revenue. Congress can authorize funding to address demographic shifts that will impact the trust assets. Social Security was designed as a supplement for worker pensions and not to be the sole income source, so retirement planning should include, but not depend upon Social Security.

Reference: The Crozet Gazette (April 5, 2019) “When Should I Start Taking My Social Security Checks?

For more information on elder law, retirement planning and estate planning, please visit my estate planning website.

Mr. Amoruso concentrates his practice on Elder Law, Comprehensive Estate Planning, Asset Preservation, Estate Administration and Guardianship.