CSRS Social Security

 

When Should You Apply for Your Social Security Benefits?

Should you apply for your Social Security benefits at age 62 or later? This article discusses the factors that influence when you should apply.

You can claim Social Security any time from age 62 to 70, but the amount you receive grows larger the longer you wait to receive it. Many people come out ahead if they wait at least until their full retirement age (FRA), which is different from the date you retire from your job. For people born from 1943 to 1954, for example, FRA is 66, reaching 67 for those born in 1960 or later.

Those who take their benefits earlier than their FRA face 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 Benefits

At first glance, it might appear that everyone should wait until they are 70. But that is clearly not the case. The answer is, “it depends.” The factors on which the answer may depend include when you stop working, how much you have set aside in savings, your health and life expectancy, whether you are married or single and whether your spouse earns more – or less – than you do.

For a person who chooses to delay applying for Social Security benefits until they reach 66, it generally 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 greater rate than you normally would, you might 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.

Another factor that could affect your decision is whether you intend to work, even part time, after you retire. 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 keep you from collecting your full Social Security benefit until you get closer to your FRA, it might make sense 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 Benefits While You Work – The Positive Side

When you reach your full retirement age, you can work and earn as much as you want and still receive your full benefits as described above. If you are younger than full retirement age and if your earnings exceed the limit as discussed above, some of your benefit payments during the year will be withheld.

This does not mean that you must try to limit your earnings. If Social Security withholds some of your benefits because you continue to work, they will pay you a higher monthly benefit amount when you reach your full retirement age.

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

Here’s how it works: After reaching full retirement age, Social Security will recalculate your benefit amount to give you credit for any months in which you did not receive some benefit because of your earnings. In addition, as long as you continue to work, they will check your record every year to see whether the additional earnings will increase your monthly benefit. For more information on this subject download 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

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.