Nearing Retirement

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Social Security: Get to know your options

May 07, 2010

If you're preparing to retire, you probably have lots of questions about when to start claiming Social Security benefits. Your personal circumstances—such as whether you have other savings or sources of income—can affect the path you'll take.

How do my age and birth date affect my benefits?

Although you can begin to collect Social Security at age 62, you may not want—or need—to. The earlier you take your benefits, the more they'll be reduced throughout your retirement.

You can use the chart below to determine your full retirement age and the percentage of benefits you'll receive if you begin taking them at various ages.

Birth year Full retirement age 62 63 64 65 66 67

Before 1938

65 years

80.0%

86.6%

93.3%

100.00%

105.5%

111.0%–113.0%

1938

65 and 2 months

79.1%

85.5%

92.2%

98.8%

105.4%

112.0%

1939

65 and 4 months

78.3%

84.4%

91.1%

97.7%

104.6%

111.6%

1940

65 and 6 months

77.5%

83.3%

90.0%

96.6%

103.5%

110.5%

1941

65 and 8 months

76.6%

82.2%

88.8%

95.5%

102.5%

110.0%

1942

65 and 10 months

75.8%

81.1%

87.7%

94.4%

101.2%

108.7%

1943–54

66 years

75.0%

80.0%

86.6%

93.3%

100.0%

108.0%

1955

66 and 2 months

74.1%

79.1%

85.5%

92.2%

98.8%

106.6%

1956

66 and 4 months

73.3%

78.3%

84.4%

91.1%

97.7%

105.3%

1957

66 and 6 months

72.5%

77.5%

83.3%

90.0%

96.6%

104.0%

1958

66 and 8 months

71.6%

76.5%

82.2%

88.8%

95.5%

102.6%

1959

66 and 10 months

70.8%

75.8%

81.1%

87.7%

94.4%

101.3%

1960 and after

67 years

70.0%

75.0%

80.0%

86.6%

93.3%

100.0%

Source: American Academy of Actuaries.

For example, if you were born in 1944, you'd be eligible to receive 100% of your Social Security benefits in 2010—once you've reached age 66. If you had started to take payments in 2006 (at age 62), they would have been reduced to 75% of their full value. If you instead waited until 2011 (at age 67) to receive benefits, you'd receive 108% of the full amount.

Will I lose benefits if I keep working?

If you start to collect Social Security before you stop working, you may forgo a portion of them.

If you collect benefits . . . And earn more than . . . You'll forgo . . .

Before you reach full retirement age

$14,160 in 2010*

$1 in benefits for each $2 above the limit

In the year you reach full retirement age

$37,680 in the months before you reach full retirement age, in 2010*

$1 in benefits for each $3 above the limit

In the month you reach full retirement age

No limit

None

*Earnings include wages, self-employment, commissions, and bonuses. They do not include investment earnings, pensions, and distributions from retirement plans. Dollar amounts are indexed annually.

However, once you reach full retirement age, the Social Security Administration will recalculate your benefits to take into account any months in which your payments were reduced.

What other factors should I consider?

Your decision is an individual one; there is no "right" answer. Several considerations may influence you, including:

  • Your current health and family's longevity history.
  • Plans for you and/or your spouse to continue working while collecting benefits.
  • Your spouse's age and earnings history.
  • Your other income sources.

Start by asking yourself, "Do I have enough money to meet my expenses without tapping into my retirement investment portfolio?" If your answer is no, taking Social Security benefits when you retire may be best for you. By leaving retirement-plan assets untapped, you can help them last longer.

The Social Security Administration's website, www.SSA.gov, can show you how various factors could affect your calculations.

What are some other options for receiving benefits?

Retirees who have the resources to meet basic living expenses without taking full Social Security benefits may want to consider an alternative strategy, such as file and suspend, restricted application, or reset.

For more information about these options, visit www.SSA.gov. Because they are complex, we suggest you consult with a financial advisor to discuss your specific circumstances.

Notes:

  • All investments are subject to risk.
  • The information is provided for educational purposes only,  is not intended to be construed as legal or tax advice, and is subject to change.
  • Links to SSA.gov will open a new browser window. Except where noted, Vanguard accepts no responsibility for content on third-party websites.
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