When the Social Security retirement income system was created in the 1930s, it was designed to provide a partial retirement income supplement. Today, the average Social Security retirement benefit is approximately $1,250 per month, or $15,000 per year. The amount of annual living expenses not covered by Social Security or income sources such as a pension or rental income is often referred to as your “income gap.”
Full, or unreduced, Social Security benefits are based upon your birth year:
Year of Birth Full (normal) Retirement Age
1937 or earlier age 65
1938 age 65 and 2 months
1939 age 65 and 4 months
1940 age 65 and 6 months
1941 age 65 and 8 months
1942 age 65 and 10 months
1943-1954 age 66
1955 age 66 and 2 months
1956 age 66 and 4 months
1957 age 66 and 6 months
1958 age 66 and 8 months
1959 age 66 and 10 months
1960 and later age 67
If you start your retirement benefits at age 62, your monthly benefit amount may be reduced by as much as 30%. Thanks to what the Social Security Administration calls “delayed retirement credits,” benefits increase 8% each year you delay receiving Social Security—up to age 70. So waiting until you reach age 70 means as much as a third more income for life.
Your personal situation can help you decide when to take benefits. Consider the following:
- Your health. If your health is poor, you may want to take benefits early.
- Are you still working? Your benefits will be temporarily reduced once your income exceeds a certain amount if you begin receiving benefits prior to your normal retirement age.
- Is your family long-lived? You may need the extra income later on, so waiting may be the best choice.
- The break-even point. If you are considering taking benefits earlier or later than your normal retirement age, you can figure your “break-even” point—the age after which your total lifetime benefits would be either less or more than they would have been if you had taken them at normal retirement age.
For more information about Social Security or to obtain a benefit estimate and earnings statement, go to www.ssa.gov. We welcome the opportunity to meet with you for a complimentary review of your goals to make sure you are on the best road for your retirement journey. We invite you to schedule a meeting with one of our experienced financial planning experts by calling 1-800-899-8858 or visiting us online at HillsBankWealthManagement.com.
Please visit our blog, HillsHelps.com, next Wednesday for part 2 of our 3 part series, “Financial Planning: How Much Can I Spend?” You’ll learn how long your retirement assets will last.
View the complete 3—Part Financial Planning for Retirement Series:
- Part 1—Financial Planning for Retirement: Social Security and the Income Gap
- Part 2—Financial Planning for Retirement: How Much Can I Spend?
- Part 3—Financial Planning for Retirement: How Much Will I Need to Save?