Social Security is a critical component of the retirement financial strategy for many Americans, so before you begin taking it, you should consider three important questions. The answers may affect whether you make the most of this retirement income source.
1. When to Start?
You have the choice of 1) starting benefits at age 62, 2) claiming them at your full retirement age, or 3) delaying payments until age 70. If you claim early, you can expect to receive a monthly benefit that will be lower than what you would have earned at full retirement. If you wait until age 70, you can expect to receive an even higher monthly benefit than you would have received if you had begun taking payments at your full retirement age. The decision of when to begin taking benefits may hinge on whether you need the income now or can wait, and whether you think your lifespan will be shorter or longer than the average American.
2. Should I Continue to Work?
Work provides income, personal satisfaction, and can increase your Social Security benefits. However, if you start collecting benefits before your full retirement age and continue working, Social Security reduces your payments by $1 for every $2 you earn above the annual limit ($21,240 in 2023). If you work during the year you reach full retirement age, Social Security cuts benefits by $1 for every $3 earned over a higher limit ($56,520 in 2023) until the month you reach full retirement age. After you reach full retirement age, your earnings no longer reduce your benefit payments [1].
3. How Can I Maximize My Benefit?
The easiest way to maximize your monthly Social Security benefit is to simply wait until you turn age 70 before receiving payments.
References
[1] SSA.gov, 2023
