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When to Start Social Security Retirement Benefits

J Terwilliger 2014
James P. Terwilliger, PhD, CFP®
Senior Vice President, Senior Planning Advisor
[email protected]
(585) 419-0670 x50630

Why is it that something that is seemingly so simple can be so complicated?

Case in point – Social Security retirement benefits.

Most retirees consider the decision of when to start receiving benefits to be a no-brainer. But life is not that simple.

This may be the most important decision faced by retirees. Making the wrong choice can mean the loss of tens of thousands of dollars in benefits to a household.

Some Basics

Full retirement age (FRA) for retirees born between 1943 and 1954 is age 66. Retirement benefits can start as early as age 62 but at a reduced level equal to about 75% of the FRA benefits.

One can also delay beyond FRA all the way to age 70, at which point initial benefits are enhanced to 132% of FRA benefits. There is no advantage to delay further.

For folks still working prior to reaching FRA, there is a $1 reduction in benefits for every $2 in earned (W-2 or self-employment) income exceeding $14,160/year.

Finally, regardless of when benefits start, the “breakeven” age is about the same – age 79-80. That is, if one lives longer than the “breakeven” age, it would have been advantageous to wait until age 70. If one does not, it would have been better to start early.

Of course, none of us has a crystal ball. The best we can do is make a judgment based on health and family history.

Let’s consider some of the major factors influencing the decision of when to start:

Single, never-married

Generally, if you are working and your annual earned income exceeds $14,160, it is best to wait until FRA before taking benefits. At that point, the decision to start depends on two primary factors: 1) your need for cash flow, and 2) expected longevity. If you are fortunate enough to not need the money and if you expect to live a long life, consider waiting until age 70 to start. Otherwise, consider starting at FRA.

If you are not working, the same two factors are important, but here the consideration can include starting as early as age 62.

Married Couple

Here we have to consider survivor’s benefits at some point in the future. A survivor is entitled to the greater of his/her own benefits or the deceased spouse’s benefits. Again, we never seem to have that crystal ball that will tell us future order of deaths. What we do know is that on average, for a couple at age 65, one of the two will live to age 93, well past the “breakeven” age.

Another factor is the spousal benefit, providing benefits to a spouse having a lower or no earnings history once the higher-earning spouse applies. This benefit is ½ of the higher-earning spouse’s FRA benefits if the lower-earning spouse starts at FRA. In some cases, starting spousal benefits then switching later to one’s own enhanced benefits at age 70 is a winning strategy.

In addition to the need for cash flow and projected longevity, we now have to consider relative ages and the relative earnings histories of the two spouses when developing a “start-Social-Security” strategy for each spouse.

Single and Divorced or Widowed

Many divorced or widowed retirees don’t realize that they may be eligible for benefits from their former spouse(s). Again, it is possible to establish a sequence of initially starting such benefits and later switching to their own benefits, thereby increasing Social Security income over their lifetimes.

But the rules are very specific and extremely complex. It often occurs that such benefits are wasted or lost by not being aware of the rules.

Seeking Help

The Social Security Administration provides a variety of access points to get your questions answered – a website with extensive explanations and calculators (, a national call center (800-771-1213), and local offices where appointments can be made with specialists.

Social Security personnel are equipped to describe options and to answer questions. However, they are not authorized to give advice or suggest strategies.

Given that, consider seeking out an advisor who has a thorough understanding of the mechanics of Social Security, and, more important, how to maximize benefits for your household based on your circumstances.

In future columns, we will explore examples of how married couples and previously-married retirees can take advantage of options available to them.

James Terwilliger, CFP®, is Vice President, Financial Planning, Wealth Strategies Group, Canandaigua National Bank & Trust Company. He can be reached at 585-419-0670 ext. 50630 or by email at [email protected]