How to decide when to claim social security benefits

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"What’s the best age to start receiving Social Security?" is one of the first questions people ask when preparing for retirement.  Several factors such as income needs, overall health and other retirement income sources will factor into your decision. If you understand how benefits are calculated, you may have an easier time selecting the age that’s right for you.

When benefits can begin
You can begin to receive Social Security benefits when you turn 62.  However, doing so forfeits as much as 30% of the monthly amount a retiree may ultimately receive.1  If you wait until “full retirement age” (65 to 67), you can receive full benefits. If you wait beyond full retirement age, benefits can increase each year until you reach age 70.2 The Social Security website ( has a calculator which can tell you what your full retirement age is based on your birth year. 
Calculating social security benefits
Social Security benefits are calculated based on "credits" and you can earn a maximum of 4 credits per year. In order to qualify for benefits, you must accumulate 40 credits during your career. Here are a few things to keep in mind:
  • You must earn and pay Social Security tax on $1,300 in wages to receive one Social Security credit. This means, in order to receive the maximum four credits in one year, you must earn and pay taxes on $5,200.3
  • Credits can be earned at any time during the years you work and don’t need to be earned consecutively.  The credits you earn remain on your Social Security record, even if you change jobs or have no earnings for a while.4
  • Benefits are based on your lifetime earnings.  Social Security calculates your average indexed monthly earnings during the 35 years in which you earned the most.5
The Social Security Administration web site offers a retirement benefits estimator to help you understand how much your benefits may be at each age.6

The best time to claim benefits
Consider the following when deciding when to claim Social Security benefits. 

Starting early: Retirees often need 70% to 80% of pre-retirement income to meet financial needs. Social Security replaces only about 40%.7 If you are having trouble making ends meet, consider claiming your benefits early. Doing so reduces your benefit amount, but you receive benefit payments sooner and will receive more payments during your lifetime, though not necessarily more money.

Waiting to claim: According to the Social Security Administration, if you’re eligible to receive a $1,000 per month benefit at your full retirement age, you’ll receive only $750 per month if you claim benefits at age 62. However, if you wait until age 70 to claim benefits, the monthly payment increases to $1,320.8 If you prefer to maximize your monthly income, waiting to claim benefits will be the better option for you.

Personal factors: Your individual circumstances will also determine the best time to claim benefits. For example, thinking about health and longevity isn’t always pleasant, but it’s an important piece of the retirement puzzle. Those who have a family history of long life spans and are in relatively good health may need to fund a longer retirement than those who have serious health issues. In the latter case, claiming retirement benefits early may make the most financial sense.

Employment and taxes: You don’t have to stop working to receive your benefits. Depending on your income, as much as 85% of your Social Security benefit may be taxable. Income from Social Security benefits combined with earned income may push you into a higher tax bracket and increase taxes on both wages and benefits amounts.  The Social Security Administration provides an overview of how income from other sources affects your benefits .

Determining the best time to claim your benefits is a decision that includes assessing your future needs, current financial factors, and retirement plans. The Social Security Administration’s web site is filled with information and provides a good place to start.

The TIAA group of companies does not provide legal or tax advice. We recommend that you consult your tax or legal advisor to address your personal retirement planning needs.
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