You can’t start collecting Social Security retirement benefits until you turn 62. Financial planner Malik Lee says his clients generally wait until nearly then to pay the matter much mind.
“Most people really start planning kind of hard 12 to 24 months out from when they’re planning to retire. And then one of the checkboxes is, what do I do with my benefits?” says Lee, founder and managing principal of Felton & Peel Wealth Management in Atlanta.
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Even then, “a lot of people are just looking at their Social Security statement and that’s it,” he says. “If someone is looking to retire, I think the ideal time [to start planning] is about 10 years out.”
Understanding what Social Security has in store for you — how your benefit is determined, and how your age, job and family status can shape it — will help you make decisions about what kind of retirement you want, what kind you can afford and what other resources you’ll need to get there.
“You’ll want to have a plan for how and when you will take advantage of your Social Security retirement benefit before it’s time to take it,” says Martin Booker, AARP program manager for financial resilience. “The earlier that you learn the details of Social Security, the more time that you can plan to live your best life in retirement.”
Here are six key things to know about Social Security before you’re of age to collect it.
1. How long you work and how much you make matter.
The Social Security Administration (SSA) calculates your benefit by determining your monthly average income over the 35 highest-earning years of your working life, adjusted to account for historical changes in wages. You don’t need to have worked 35 years to qualify for retirement benefits — most people do so after about a decade in the workforce. But if you work fewer than 35 years, there will be years with zero income figured into your calculation, reducing your benefit amount.
On the other hand, years 36 and beyond could produce bigger future payments if those years are among your most lucrative (as is the case for many workers in their 50s). They will push lower-earning years from early in your work life out of the benefit equation.
Working longer, or holding on to a better-paying job for its own sake, may not be the right choice for everyone nearing retirement age. But keep in mind how a late career shift or early exit could affect not just your present income but your future Social Security payment.
2. Benefits get bigger the longer you put off taking them.
You can claim retirement benefits as early as age 62, but you only become entitled to your full benefit — 100 percent of the amount calculated from your lifetime earnings — when you reach full retirement age (FRA), which will be 67 for people born in 1960 or later (that is, anyone currently 62 or younger).