When to apply
for Social Security

When should you apply for Social Security retirement benefits? That question is coming up more often these days as baby boomers begin nearing age 62. How do you decide when is the right time for you? Here are some points to ponder with regard to that decision.

n Full retirement age — Depending on when you were born, full retirement age ranges from 65 to 67. If you are among the first wave of baby boomers, born in 1943 to 1954, your full retirement age is 66. This is the magic age at which you become eligible to receive 100 percent of your Social Security benefits.

n Early retirement — “Early retirement” means collecting Social Security before full retirement age. Your benefits are adjusted downward according to the number of months left before full retirement age. This is a permanent adjustment and affects all your payments for the rest of your life. If your full retirement age is 66 and you apply at 62, the reduction is 25 percent. The closer you are to retirement, the smaller the reduction.

n Late retirement — “Late retirement” means collecting Social Security after full retirement age. You get fixed increases in your benefits for the delay. For those born in 1943 or later, the increase is 8 percent per year. The benefits only increase up to age 70. After that, the only increases you gain are for inflation.

n Break-even age — How long do you have to live to make a delay worthwhile? Compare the total benefits received over time under each option. Example: You could collect a monthly benefit of $960 at age 62, $1,281 at 66 or $1,690 at 70. If you delay the payments to age 66, you’ll receive more if you live past age 78. If you delay until age 70, your benefits will be greater if you live past age 83.

n Working and Social Security benefits — Your benefits may be reduced if you continue working while collecting benefits before full retirement age. This applies to earnings for months prior to attaining full retirement age. For all earnings above the earnings limit, you lose 50 percent of that amount in benefits. For the year that you reach full retirement age, the rate of reduction is smaller and the earnings limit is higher.

n Longevity and health — Do you come from a long-lived family, with good health and no life-threatening conditions? If so, then you may beat the odds by taking a later retirement. The risk is that you may die prematurely and collect less. If your health is poor, you may not be able to work after age 62. If you have other savings, a pension or a retirement account to tide you over, you could still delay collecting benefits.

There are other considerations, such as the time value of money and spousal benefits. The bottom line: evaluate your options carefully before applying. Once you start collecting, your decision is final. See your financial adviser and visit the Social Security Administration’s Web site, www.ssa.gov, for more information.

Mary Decker is a CPA, Certified Financial Planner and a principal of Hascal Sjoholm & Co., a full-service CPA firm in Everett. She specializes in tax and estate planning. She can be reached online at www.hascal.com or at 425-252-3173.