While Americans know what Social Security is and may have heard some rather dire predictions for its future, many of us are not aware of the finer points of how these benefits work. Just asking around you may hear that retirement age is 65 and that this is when you can start to receive the benefits then but this is not the case. Even when you know exactly when your benefits start, you may still be uncertain about when you should apply. This is where the guidance of a Fee Only financial advisor can be very useful.
In “The costs of retiring too soon,” Yahoo! Finance notes that your Social Security benefits depend on “work history and your age at the time you apply for benefits.” Your ‘full retirement age’ is the age at which you can get full retirement benefits and this can vary depending on when you were born (it is between 66 and 67). While there are some cases in which you can apply for Social Security as early as 62, doing so means you will not get your full retirement benefits. Instead, amount you receive will increase when you delay filing for benefits to a time after your full retirement age but before age 70.
Even if you are able to delay receiving benefits, you need to be aware that Social Security was “designed to replace about 40% of your preretirement income so savings should still be a priority.” Without keeping this is mind, you may spend your working life assuming that Social Security will completely fund your golden years, not realizing that this was never the intention.
According to Yahoo:
“The bottom line: Financial planners and experts like AARP agree it’s better to delay filing for Social Security for as long as possible to increase the amount of the monthly benefit. Of course, health or employment status may not always make that possible.”