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When to Collect Social Security

Most of us look forward to the time when we can retire.  Retirement can often come with a steady paycheck from the government.  However, collecting Social Security may seem as easy as filling out a few forms, but if not handled properly, you could be missing out on some big bucks in retirement.  Here are a few things to keep in mind when you are deciding when to collect Social Security:

-  The longer you wait, the more you get:  Every person who is eligible for Social Security can begin collecting a reduced benefit at age 62.  Just how reduced depends on the year you were born. Go to www.socialsecurity.gov for details.  However, your benefit increases each month that you wait past 62 until you reach age 70.  Once you hit 70, the benefit increase stops.  So the question becomes do I take my benefit at 62, 70, or somewhere in between? 

-  Penalty for workers:  If you plan to take your benefit before your Full Retirement Age (see website ) you will be penalized $1 in benefits for every $2 in earnings over $15,720 for 2016.  If you earn more than $41,880 in 2016 and that is the same year you hit full retirement age, your penalty will then be $1 for every $3 in earnings.  The point is that if you are under your full retirement age, you will want to make sure that you are not earning more than these thresholds or your benefit can be greatly reduced.

- Maximize your benefit:  The theory for Social Security used to be to collect it as soon as you are eligible.  After all, it is free money.  However, that may not be your best option.  Social Security really is the best stream of income you will receive in retirement.  Why?  The money is as guaranteed as we can get in this world (backed by the federal government), it increases each year with inflation (a trait most annuities or pensions do not have), and it is tax efficient.  All of these benefits culminate to create a stream of income we want to maximize.  So, if you have the ability and the means to put off collecting your benefit, it can be very beneficial to your late retirement years to have a larger, inflation adjusted stream of income coming in every year no matter what happens to the economy.

-  Consider Social Security Planning:  Understand the rules and nuances of Social Security.  If you don’t have the time or patience to learn them, work with an expert to help you decide your best personal strategy.  There are so many complexities to this program and it is too important to decide on a whim.  It may be best for one spouse to collect and one to wait, both spouses to wait, or to collect as early as possible.  There is no one right answer for everyone.  Your individual situation must be reviewed to determine the best course of action for you.

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