If you are 40 or younger, you may think that social security will crash before you retire. I know that, until about 10 years ago, I thought I wouldn’t live to receive my earned benefits, or that the program would be dissembled before I retired. The closer you get, the more you begin to count on the system to come through for you. In my case, I do think I will see at least some of the benefits I have earned.
I will turn 62 next February, making me eligible for social security benefits. I wanted to know if it would be advantageous to me to start collecting benefits then, or wait until “full retirement age” which for me is 66. There is also the option of delaying benefits until age 70. The monthly benefit increases if you wait longer to start collecting. Here is an important piece of information: It is not necessary to stop working in order to start collecting. It is allowable to work between age 62 and 66 and still collect benefits, although the monthly benefit is reduced after a certain amount of earnings. The total benefit amount is then recalculated at age 66, so the penalty for early collection is really minimized somewhat, even if you work full-time during those years.
The fantasy underlying this calculation is the idea that I could “stop” working in the world, and spend the rest of my life writing. The reality is that I have every reason to feel insecure about my ability to maintain full-time employment for 5 more years.
So I have done the math. The lifetime calculation depends, of course on how long one lives to collect benefits. If I wait until age 70, and then die that year, well, tough luck. I would have to expect to live beyond age 80, to accrue more lifetime benefits by waiting til age 66. Only if I expected to live to age 85 would I benefit by waiting until age 70 (which is off the table anyway, the real question is 62 versus 66).
As of today, a woman born on my birth date can expect to live to age 82, which I am thinking is about right in my case.
(Pause here a minute to think about reaching the 20-years-to-go mark, it’s nothing really!)
So here is the math. It’s based on total lifetime benefits according to death age. I think it’s a no-brainer actually.
If I die at 70.
Age 62-70 = 9 years x 12 months = 108 months @ $1464/month = $158,112
Age 66-70 = 5 years x 12 months = 60 months @ $2,004/month = $ 120,240
Age 70-70 = 0 years x 12 months = 0 months @ $2712/month = 0
If I die at 75
Age 62-75 = 14 years x 12 months = 168 months @ $1464/month = $245,952
Age 66-75 = 10 years x 12 months = 120 months @ $2,004/month = $ 240,480
Age 70-75 = 5 years x 12 months = 60 months @ $2712/month = $ 162,720
If I die at 80
Age 62-80 = 19 yrs x 12 months = 228 months @ $ 1,464/month = $ 333,792
Age 66-80= 15 years x 12 months = 180 months@ $2,004/month = $ 360,720
Age 70-80 = 10 years x 12 months = 120 months@ $2,712/month = $ 325,440
If I die at 85
Age 62-85 = 24 years x 12 months = 288 months @ $1,464 = $421,632
Age 66-85 = 20 years x 12 months = 240 months @ $2,004 = $480,960
Age 70-85 = 15 years x 12 months = 180 months @ 2712/month = 488,520