Tim Burke: Insights on when to start collecting Social Security benefits

Nye County and Pahrump have a significant portion of our population that has retired or is nearing retirement age.

According to the U.S. Census Bureau (July 2018) 54.6% percent of our residents are age 50 or older and 30.1% are 65 or older. That also means that almost 25% of our population is approaching age 62, which is the first year that most people can start to receive Social Security benefits.

Social Security and Medicare are primary sources of income and health insurance for residents who are retiring. The question for many persons approaching retirement is: When should I start collecting Social Security? A major part of that decision will be figuring out what is considered your “full retirement age” because that is the age at which you can collect your full benefit.

Deciding when to start collecting Social Security is a personal decision that should be based on your individual and family circumstances.

It used to be that you could retire “early” by collecting reduced benefits starting at age 62 or you could wait until you were 65. But now, depending on the year you were born, you will not reach full retirement age (FRA) until between 65 and 67.

Today, the full retirement age is 67 for those born in 1960 or later. If you were born in 1937 or earlier, your full retirement age is 65.

The full retirement age rises two months every year after that until it caps out at age 67. Generally, it’s best to postpone Social Security benefits at least until you reach full retirement age, which is determined by the Social Security Administration (SSA).

Trying to figure out for yourself what you will collect in Social Security benefits can be difficult. Social Security benefits are calculated by combining your 35 highest-paid years (if you worked for more than 35 years) and then the Average Indexed Monthly Earnings, or AIME, is determined.

The benefit amount is then calculated based on factors like the year in which collection begins, whether you have reached full retirement age, and whether you will continue to work while collecting benefits.

Fortunately, you can be spared having to compile that information and calculate your benefit because the SSA has done it for you.

On the Social Security Administration website is a tool, “The Retirement Estimator” that calculates estimates based on your actual Social Security earnings record. It is available at https://www.ssa.gov/benefits/retirement/estimator.html

Determining whether or not you should take your benefit at age 62 or wait until age 66 or even 70 becomes partly an exercise in math and partly based on your personal factors. Are you healthy? Does your family history and genetics favor you living well into your 80s or 90s? Do you have any other income sources? Is it enough to support you and not be constantly broke? Do you plan to keep working at least part-time? You can work while collecting on your social security but there are income limits.

The Social Security earnings limit is $1,470 per month or $17,640 per year in 2019 for someone age 65 or younger. If you earn more than this amount, you can expect to have $1 withheld from your Social Security benefit for every $2 earned above the limit. The Social Security income threshold increases to $3,910 per month or $46,920 a year in the year you turn your full retirement age.

Let’s look at an example: if you think you will live to at least 85 (the average life expectancy for people born in 1957) and you want to retire at 62, and if your monthly benefit is $750 then your total benefit would be $207,000 (23 years x 12 months x $750).

If you delayed collecting until age 66 your total benefit ($1,000 per month) would be $228,000 and if you waited until age 70 ($1,320 per month) you would collect $237,600. Another consideration is that if you’re currently working and you have health insurance, if you retired at age 62 you would not receive Medicare until age 65 so there would be a gap in coverage.

When it comes to calculating a start date for Social Security benefits, however, there’s not an age that’s appropriate for everyone. Consider your own financial need, health and post-retirement plans before making the call. Deciding when you should start receiving benefits is also a little bit of a gamble. I guess that is appropriate for residents in our gambling state!

Tim Burke is a businessman, philanthropist, educator and Pahrump resident. Contact him at timstakenv@gmail.com