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Planning for Social Security Retirement Benefits

By Mark U. McGahee, CFP®, ChFC

One of the primary determining factors of the size of your Social Security (SS) retirement benefit is the age you are when you start receiving it.  Most likely you know that you become eligible to receive your benefit when you turn 62 years of age.  But is it the best way to celebrate your 62 birthday by receiving the SS benefit, or would you be better off to wait until your Full Retirement Age (FRA), or even later, say to age 70?  It depends on several elements unique to your circumstances and needs.

If you were born between 1943 and 1954, your FRA is 66.  There is an incremental change for those born between 1955 and 1959 for FRA, until it reaches 67 for those born in 1960 and after.  If your FRA is 66, and you start your benefit at 62, your benefit is permanently reduced by 25%.  If your FRA is 67, and you start at 62, the permanent reduction is 30%.  Conversely, you are rewarded by 8% per year beyond your FRA by delaying your benefits until your 70 birthday.  For perspective, assume your monthly benefit at FRA is $2000.  If you start at 62, it will only be $1500; if you wait until age 70, it will be $2600. (1)

If you decide to receive your benefits before your FRA, and you continue to work, you could be in for a surprise. If you are working and receiving SS benefits in 2014, and you will not reach FRA this year, then your benefits will be reduced by $1 for every $2 you earn above this year's limit of $15,480.  If you are working and you will reach FRA later this year, then your benefit will be reduced by $1 for every $3 you earn above $41,400 until the month you reach FRA.  Beginning in the month you reach FRA, there is no limit on your earnings. (2)

How do you decide when to begin receiving your SS benefits?  Begin by examining your projected monthly benefit.  You can do this at  If you haven't set up an account at that website, you may do so by following the simple instructions.  You will see your benefit projections for age 62, your FRA, and age 70.  You will also see what your benefit would be if you were to qualify for disability benefits from SS, as well as survivor benefits for your family.

Now that you have some numbers, assess your personal situation.  Are you content with your job and would you want it to continue?  What does your spouse think about that?  How is your health?  A healthy person may choose to continue working, while an unhealthy person might not.  What is the health history of your family?  Will you receive a pension from a defined benefit plan?  Do you have a 401k plan or an IRA with sufficient assets in it to provide enough income?  Do you have other sources of income such as rent or annuity proceeds?  Are you the named beneficiary of a trust?  Have you made provisions for long-term care needs for you and your spouse yet?

Consider this, a person whose FRA is 66 and begins receiving SS benefits at 62 experiences a permanent "pay cut" of 25% by not waiting four more years to start.  By age 75, the cumulative benefits are roughly the same for the early beginner, and the one who waited until FRA.  The difference is that the one who waited will always have the larger check.

Mark McGahee may be reached at 757 539-9465 or



ChFC is a financial planner and specializes in investment and protection planning.   Securities offered through Securities America, Inc. Member FINRA/SIPC. Advisory Services offered through Securities America Advisors, Inc. Nansemond River Financial Services and the Securities America Companies are unaffiliated.  2484 Pruden Boulevard, Suite B, Suffolk, Virginia 23434; Phone 757-809-4708.  Past performance is never indicative of future performance.  Neither Mark McGahee nor Securities America is in the tax advisory business, please contact a qualified tax professional for benefits or liabilities of investing.