When to Apply for Social Security Benefits and other Social Security Basics

When Should You Apply for Social Security Benefits?

You can typically apply for Social Security benefits from age 62 to age 70, but the longer you wait to claim it the amount you receive grows larger. There are a lot of people who come out ahead if they wait until their full retirement age (FRA). Full retirement age is different from the day you retire from your job. For individuals born from 1943 to 1954, full retirement age is 66, reaching 67 for those born in 1960 or later.

Individuals who take their benefits earlier than their FRA deal with reductions of 6 2/3% per year for the first three years they take benefits prior to their FRA. For example, an individual with an FRA of 66 who starts taking benefits at age 63 will experience a 20% reduction in their Social Security benefits. Those taking an earlier benefit will also see a 5% per year decline for each year further out than three years. For example, if the same person were to take benefits at 62, the reduction would be 25%.

On the other hand, there are “delayed retirement credits” of 8% per year up to age 70 for those born in 1943 or later. Here’s an example: An individual whose FRA is 66 would receive $1,000 a month if they waited to apply at that age. If they applied for benefits at age 62, they would receive $750 a month, but if they waited until 70, they would receive $1,320 a month.

The Many Variables in Deciding When to Apply for Social Security Benefits

Even though it might appear that everyone should wait until they are 70 that is clearly not the case. There are many factors at hand when it comes to applying for benefits. The factors on which the answer may depend include when you stop working, how much savings you have set aside, your health and life expectancy, whether you are married or single and whether your spouse earns more – or less – than you do.

For an individual who decides to delay applying for Social Security benefits until they reach 66, it typically takes about 12 more years to collect as much as if you started at 62. If you were to live until 78, then there would be an advantage to waiting. But no one can predict how long they will live.

Also, if delaying taking benefits causes you to eat into other savings at a higher rate than you normally would, you may want to take them early. In addition, you would probably be able to enjoy spending the money more when you are younger, e.g., between ages 62 and 66, versus waiting until you are 78 to break even.

Do you intend to work, even part time, after you retire? This could affect your decision. Social Security has earnings tests that will reduce your benefit by $1 for every $2 you earn over a specified amount ($15,140 in 2013) between age 62 and the year you reach your FRA, and by $1 for every $3 you earn over another, higher amount ($40,080) between age 62 and the year in which you reach your FRA.

If your earnings will hinder you from collecting your full Social Security benefit until you get closer to your FRA, you may want to delay applying for benefits. If you are among those who think that Social Security will cease to exist in the future, you would be inclined to apply for your benefits early. However, it is likely that those who are at or near retirement now would likely be spared any cuts.

Receiving Social Security Benefits While You Work – The Positive Side

Once you reach full retirement age, you can work and earn as much as you want and continue to receive your full retirement benefits. If you have not yet reached full retirement age and if your earnings are more than $14,640/yr., a portion of your benefit payments during the year will be withheld.

If you continue to work, you do not need to limit your earnings. Social Security will withhold some of your benefits, but they will pay you a higher monthly benefit amount when you reach full retirement age.

If you continue to work and earn more than the exempt amount it will not, on average, reduce the total value of lifetime benefits you receive from Social Security. It may actually increase them.

This is how it works: After reaching full retirement age, Social Security will readjust your benefit amount to give you credit for any months in which you did not receive some benefit because of your earnings. And for as long as you continue to work, they will check your record yearly to see whether the additional earnings will raise your monthly benefit. You can read more about Social Security’s publication # 05-10069 titled “How Work Affects Your Benefits” at http://www.socialsecurity.gov/pubs/EN-05-10069.pdf.

You can apply for Social Security retirement benefits when you are at least 61 years and 9 months of age and want your benefits to start within the next three months. Even if you are not ready to retire, you still should sign up for Medicare three months before your 65th birthday.

How to Apply for Social Security Benefits

You can apply for Social Security benefits in any of the following ways:

In person: Visit your local Social Security Office. Locations can be found at https://secure.ssa.gov/ICON/main.jsp.  Call first to make an appointment.

By phone: Call 1-800-772-1213.

Online: Use the Social Security Retirement/Medicare Benefit application at: https://secure.ssa.gov/iCLM/rib.