Why claiming Social Security early could be more popular than ever this decade – By Sean Williams (The Motley Fool) / Jan 7 2020
Just two days ago on Jan. 1, Social Security marked its 80th anniversary of making payouts to retired workers. Today, it’s a program responsible for divvying out more than 64 million benefit checks each month, many of which wind up in the hands of seniors.
Just how important is Social Security to these retirees? According to data from the Social Security Administration (SSA), some 62% of retired workers receive at least half of their income from the program.
Furthermore, over 15 million retired workers are being pulled out of poverty each month because of their payouts, based on an analysis by the Center on Budget and Policy Priorities. Suffice it to say that deciding when to begin taking your Social Security payout can have a big impact on your financial well-being later in life.
Deciding when to take Social Security is the most important decision seniors will make
Although there are more than a half-dozen factors that can ultimately affect what you’ll receive or get to keep from Social Security, there are four factors that really stand out. The first two, your work history and earnings history, are inextricably tied at the hip. The SSA will take your 35 highest-earning, inflation-adjusted years into account when determining your benefit at full retirement age. This is why working at least 35 years is so important; otherwise, zeros are averaged in for each year when you didn’t work.
The third factor that helps calculate your payout is your birth year, which is what’s used to determine your full retirement age – i.e., the age at which you’re able to collect 100% of your monthly payout. For most Americans, their full retirement age is 66, 67, or somewhere in between. Put simply, taking your benefit prior to reaching your full retirement age means accepting a permanent reduction. Conversely, waiting until after your full retirement age to begin receiving your benefit can boost it above 100%.
The last and arguably most important factor is your claiming age. Although eligible beneficiaries can begin taking their payouts as early as age 62, Social Security incents patience. For every year an individual holds off on taking their benefit, their monthly payout will grow by up to 8%, up until age 70. All things being equal, such as work history, earnings history, and birth year, a person claiming their benefit at age 70 could net up to a 76% higher monthly payout than an individual taking their payout as soon as possible (age 62).
Continue to article: https://www.usatoday.com/story/money/2020/01/07/claiming-social-security-early-could-be-more-popular-this-decade/40936449/
