Is There a Best Age for Retirement?

Most retirees face the question of whether to take Social Security benefits early, wait until full retirement age or possibly hold out longer. Unfortunately, there is no one right answer, according to experts at the Pennsylvania Institute of Certified Public Accountants.

Below is an overview of Social Security payment options, as well as several factors to consider when making a decision that's right for you.

A person can begin collecting Social Security benefits as early as age 62. However, when collecting that early, the monthly benefit is reduced to offset the longer period over which benefits will be received. For example, if you elect to remove benefits at age 62 in 2007, the benefit reduction is about 25 percent.

Keep in mind that the reduced amount is permanent so the benefit will not increase once full retirement age is reached.

The retirement age for collecting full Social Security benefits gradually increases. Under current law, for those born in 1937 and earlier, 65 is the retirement age for collecting full benefits. Those born between 1938 and 1942, the retirement age increases by a few months per year.

The retirement age for people born from 1943 through 1954 is 66, increasing by a few months per year for those born up to 1959. Those born in 1960 won't receive full benefits until they are 67.

Should one delay collecting Social Security benefits beyond the full retirement age? "Delayed retirement credits" can be earned, increasing the monthly benefit eventually received.

For each year that payments are delayed after normal retirement age, monthly payments can increase by as much as 8 percent. Delayed retirement credits stop accruing at age 70.

Which option is best for you? All three are designed to eventually pay out roughly the same amount; there are some instances when one alternative might make more sense than another.

One important factor is life expectancy. Many life-expectancy calculators are available online, but be sure to take into consideration personal health and family history. If, for example, your health is relatively good, and your parents and grandparents lived into their 80s or 90s, you might want to consider delaying benefits until full retirement age or later, if you can afford to do so.

On the other hand, if your health is not good, you might opt for early benefits.

If one plans to continue working after retirement, taking early benefits would be a mistake. There is an "earnings cap" penalty on Social Security benefits paid prior to retirement age. If you begin collecting benefits early and your job brings in more than the cap — $12,960 for 2007 — you would lose $1 in benefits for every $2 earned over the annual limit.

Once you reach the set retirement age, there is no loss of Social Security benefits, regardless of earnings.

As for surviving spouses: A surviving spouse is entitled to 100 percent of the primary wage earner's benefits. To leave the most income for a surviving spouse, you should consider waiting until the established retirement age or later to start receiving benefits.


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