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One of the most important retirement decisions a person makes is when to start receiving Social Security benefits. The earliest age for someone who is not disabled or widowed is age 62. These people often do a quick and dirty calculation and think that they will not live long enough to make up the dollars lost by dealing their start date. Many people forget to include the extra free money they may be able to receive.

It is important to understand that to do this you must meet a few qualifications. First, you must be full retirement age. For anyone born before 1954, this is age 66. It gradually goes up until people born after 1960, need to be age 67. You also must be either married or widowed. There is one more group that meets the last requirement. That is a divorced person who was married for at least 10 years.

We know that a Baby Boomer who starts SS at age 62 is penalized 25 percent of his or her normal benefit for the rest of their lives. If you delay starting Social Security until age 70, you receive an 8 percent bonus each year. This does not mean that you receive nothing for these four years. You could be receiving spousal benefits, which is half of your partner’s benefit at full retirement age while yours continues to grow 8 percent for four years. At that time, you would switch to your own higher benefit.

You cannot do this until you have reached full retirement age. Also, spousal benefits are reduced for each year that you claim early. Using the wrong claiming schedule could reduce family benefits by more than $100,000 over a family’s lifetime.

There was a recent story that estimated that 80 percent of women took their SS benefits too early. They reported that women who took benefits early received an average benefit of $1,025 per month. By waiting to full retirement age, their benefit would have averaged $1,270 per month. If they waited until age 70 when they still had a life expectancy of 16 years, they would have received a monthly check of $1,630. Maybe if they understood the information at the beginning of this column they would be able to receive the higher benefit. Social Security planning and income planning go hand in hand. You need to coordinate to produce an income plan to meet your needs.

Understand all of the facts by attending education events that teach the basics and work with an advisor who understands the SS system.



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