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27.5% 1941 65 years and 8 months 44 $766 23.33% $358 28.33% 1942 65 years and 10 months 46 $758 24.17% $354 29.17% 1943–1954 66 years 48 $750 25% $350 30% 1955 66 years and 2 months 50 $741 25.83% $345 30.83% 1956 66 years and 4 months 52 $733 26.67% $341 31.67% 1957 66 years and 6 months 54 $725 27.5% $337 32.5% 1958 66 years and 8 months 56 $716 28.33% $333 33.33% 1959 66 years and 10 months 58 708 29.17% $329 34.17% 1960 and later 67 years 60 700 30% $325 35%

* Based on a $1,000 primary insurance amount

Recognizing the Potential Payoff of Working Later in Life

      Suppose you’re approaching 62, so you’re still years away from full retirement age. You’re still on the job, and you like it that way. Maybe your employer’s health plan is cheaper than any healthcare coverage you could get on your own, because you’re still too young for Medicare. Maybe you’re making good money. If so, you may be increasing your future Social Security benefit, if your current earnings are higher than some of the earlier years on your record.

      At 62, you could face a decision on whether to work and start to collect retirement benefits. You already know that Social Security pays less each month for early retirement. But there’s another consideration: You’re likely to smack right into the earnings limit.

The earnings limit is a potential issue for individuals who claim retirement benefits before their full retirement age (see Chapter 13 for a more complete discussion). What it means is that if you begin Social Security while still earning money and you haven’t reached full retirement age, the SSA will withhold part, or even all, of your benefit if you earn above a certain amount per year. At full retirement age, though, you can say goodbye to the earnings limit. The SSA will raise your payment to give back the money it withheld.

      For early retirees, the SSA holds back $1 for every $2 earned above a certain amount ($18,240 in 2020). The limit changes for the year in which you reach full retirement age. For individuals in this category, the SSA withholds $1 for every $3 earned above a certain limit ($48,600 in 2020). The withholding stops during the month that you reach full retirement age. The earnings limit rises each year to keep up with rising wages.

      

The earnings limit, combined with early retirement reductions, creates a potential double whammy: You temporarily get a smaller benefit because of working, and — more important — you permanently get a smaller payment because you claimed retirement benefits early. Does that make sense for you? It could. You may need the money. You may be improving your earnings record, which will boost your Social Security benefit. (You can get insight on this point by working with Social Security’s online calculators or by calling the SSA.) But think it through. Think about how long you could live. Think about whether you really need the early Social Security benefit. If you make enough money on your own, you may be better off working (even part time) without collecting Social Security. Later, you can enjoy a larger retirement benefit for the rest of your life.

      

You don’t permanently lose the money withheld because of the earnings limit. At your full retirement age, the SSA returns the withheld money in the form of higher benefit payments.

Putting It All Together: The Right Time to Begin Collecting Benefits

      

Selecting the right time to begin benefits is a personal matter. Only you know what makes sense for your family. But you should keep in mind some key points when you make this critical choice:

       Make sure that you know when you qualify for full benefits, but remember you have broad discretion about when to claim. Refer to Table 3-1.

       Know your benefit. By using the Social Security retirement calculators (see “Estimating how much you’ll get each month based on when you retire,” earlier in this chapter), you can quickly get an idea of the benefit you’d receive before, at, and after your full retirement age. Each year you wait to collect beyond your full retirement age will add 8 percent to your benefit. Each year you begin collecting before your full retirement age will reduce it between 5 percent and 7 percent. In other words, the earlier you retire, the less Social Security you get each month. For many people, that’s a powerful argument to hold off claiming benefits.

       Be realistic about your life expectancy. If you don’t like to think about how long you’ll live, get over it. Your life expectancy, and the possibility that you may exceed it, should be factors when you make plans for Social Security and retirement in general. Of course, no one knows how long you’ll live. But there’s plenty to consider:Do people in your family tend to live long?How would you grade your own lifestyle in terms of fitness, exercise, diet, and other personal habits that affect health?How healthy are you? Do you suffer from a chronic condition that is likely to shorten your life?Do you have a lot of stress? If so, do you have ways of managing that stress that make you feel better?Do you lug around a lot of anger and worry? If so, can you do anything about it?

       Think about all your sources of income and your expenses. Consider your

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