In 2016, the United States will choose its next president — an important election year, to be sure. But that’s not the only kind of election year you’ll want to pay attention to. There is the election year for Social Security retirement benefits. When you decide to take your benefits will have a great impact on how much you get and therefore, how much you need to save for retirement. We’ve got the details below.
The Social Security Basics
The idea behind this program is that you put money in during your working years and you get money as a senior to help fund your retirement. You can use a Social Security calculator to estimate how much money you can expect to receive. The amount you will get is based on factors like how many years you worked, how much money you made during that time and when you elect to receive your retirement benefits — also known as your “election year.”
When Should You Retire?
Full retirement age is either 66 or 67 years old, depending on when you were born. Anyone born in 1960 or later will officially reach full retirement age at 67. But you don’t have to wait that long to collect Social Security retirement benefits. You can elect to start receiving benefits as early as age 62. But you will receive a smaller benefit, for the rest of your life. At age 62, your retirement will be about 25% lower than what you would receive at full retirement age. Of course, you can still retire from work earlier than you elect to take benefits. Just make sure you have enough money to cover those gap years before your official election year. You don’t want to have credit card debt hanging over your head as you enter retirement because you didn’t save enough.
Waiting = More Money
If you delay electing Social Security retirement benefits, you will receive a larger monthly amount. When it comes to your Social Security election year, waiting longer means getting a larger amount … up to a point. Your benefit will increase from your full retirement age up until you reach age 70. That is the highest your benefits will be, and there is generally not a reason to wait any longer to receive the benefits. Just remember that in some states and at some income levels, you may have to pay taxes on your Social Security benefits.
When you elect to receive Social Security retirement benefits affects the amount you will receive. And that amount will be the same through your entire retirement (aside from cost-of-living adjustments). It’s important to do your research, look at your other streams of retirement income (pensions, 401(k)s, IRAs, etc.) and make the decision that is best for you and your family.
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