Myth #1:
I should apply for Social Security benefits as soon as I am 62 because Social Security won’t be around long.
According to the Social Security Administration, if no changes are made, current benefits will continue until at least 2034. By 2034, benefits will need to decrease to 79% of current scheduled benefits unless changes are made.
Myth #2:
I never worked or didn’t work enough to be eligible for Social Security benefits so I cannot receive benefits.
If you are married or were married for at least 10 years and are now divorced and you are at least age 62, you can apply for spousal benefits. The amount of your benefit is dependent on your spouse’s benefit and your age when you apply.
Myth # 3:
I should apply for Social Security benefits as soon as I am 62 because I will be receiving the benefits for a longer period of time.
If you have a critical illness or your life expectancy is less than average, it makes sense to start collecting benefits as soon as you can. You may also want to begin collecting benefits as soon as you can if your financial situation warrants it.
However, if you expect to live to at least age 80 and you can afford to wait, it may benefit you long term to wait until your full retirement age or later to start collecting benefits. Let’s look at an example:
- Your expected benefits at age 62: $1,735 per month.
- Your expected benefits at age 66: $2,276 per month.
- Your expected benefits at age 70: $3,005 per month.
If you start collecting benefits at age 62, at age 66 (your full retirement age), you will have already received $83,280 in benefits. Makes you think you should start collecting early, doesn’t it?
At age 78, you will have received $353,940 in benefits. If you had waited until age 66 to start collecting benefits, at age 78, you will have received $355,056 in benefits. Consequently, if you live longer than age 78, you are better off, over your lifetime, waiting until your full retirement age to start collecting benefits.
What if you wait until age 70 to start collecting benefits? In ten years, at age 80 you will have collected $396,660 in benefits. This is more than the total you would have received in eighteen years if you started collecting benefits at age 62.
If you live to age 85, here at the total amounts you would receive for each:
- Start collecting at age 62, you will have received $499,680.
- Start collecting at age 66, you will have received $546,240.
- Start collecting at age 70, you will have received $576,960.
Of course, none of us know how long we are going to live. If your family history is to live into the late eighties and early nineties, chances are you will, also. To discover you expected benefits, go to www.ssa.gov/myaccount.
Need help analyzing when you should start collecting benefits? Contact us [email protected].
Judith Ackland has more than 26 years of experience in accountancy and financial planning, including seventeen years as a CFO of a diverse business. She started Crystal Financial in 2010 to help a wide array of individuals, families, and business owners better understand their finances and how good financial management could help them achieve their goals. Judith has an MA in Professional Accountancy from the University of Nebraska at Lincoln as well as a Certified Public Accountant Certificate and a Certified Financial Planner designation.
