Here are some of the common questions we receive from folks who are considering an early retirement.
What is my full retirement age?
Should I start taking benefits as early as possible?
You can choose to begin receiving benefits as early as age 62. Of course, if you elect to receive your benefit before your full retirement age, it will be reduced. Once you turn 62, you can begin receiving your Social Security income benefit at any time you decide.
When opting to receive the benefit before your full retirement age, the income benefit will be reduced by 5/9 of 1% for each month before your full retirement age, up to 36 months. If the number of months is greater than 36, the benefit is decreased by 5/12 of 1% per month for each month greater than 36.
For example, let’s say that Sam was born on July 1, 1955 and turned 62 years old on July 1, 2017. Sam is planning to retire at the end of the year and begin receiving his Social Security benefit in January 2018. Sam’s full retirement age is 66 and 2 months (or September 1, 2021) and he will be 62 years and 6 months old at the time he begins his benefit. This is approximately 44 months before his full retirement age. The benefit reduction calculation is 5/9 of 1% for 36 months, plus 5/12 of 1% for 8 months. (.00556 * 36) + (.00417 * 8) = .234
Sam’s benefit will be approximately 1 - .234 = .766 or 76.6% of his full retirement benefit.
If you delay receiving your Social Security benefit, the delayed retirement credit is 8% per year.
How will part-time or full-time work affect my social security?
If you receive Social Security benefits prior to full retirement and you continue to work, your benefits may be reduced.
If you are under full retirement age for the entire year, Social Security will deduct $1 from your benefit payments for every $2 you earn above the annual limit. In 2017 the annual earning limit is $16,920.
If you file to receive your Social Security benefit in the year you reach full retirement age, Social Security will deduct $1 in benefits for every $3 you earn above a higher limit. The limit in 2017 is $44,880, but they only count earnings received before the month you reach your full retirement age.
After you reach full retirement age, you can earn unlimited income. Withheld benefits will be returned after you reach full retirement age.
Is my Social Security benefit taxed?
Some of your Social Security benefit may be subject to tax. If your combined income is between $25,000 and $34,000 ($32,000 - $44,000 if married, filing jointly), then up to 50% of your benefit is taxable. If your combined income is above $34,000 ($44,000 if married, filing jointly), then 85% of your benefit is taxable.
Can I withdraw my Social Security retirement claim and reapply later to increase my benefit amount?
Yes. Once you file to receive your Social Security benefit you may withdraw your claim and reapply later to receive a higher benefit. The withdraw request must be done within 12 months of your initial retirement start date and you must repay all of the benefits that were received.
If I want my benefit to start on a certain date, when should I apply?
The Social Security Administration recommends that you apply for benefits about three months before you want your first benefit payment to be received.
For more information, you can visit www.socialsecurity.gov/retire
Kevin Warman
(Last Updated 10/5/2017)