Many Americans collect Social Security benefits early and face reduced payments, but by waiting until their official retirement age, they could receive full benefits.
John Post works hard.
He’s 62 years old and has spent his entire career in education. As a high school superintendent, most of his work days start at 7 a.m., and many don’t end until 10 or 11 p.m. after a school-related event. He works six days a week and rarely takes a vacation. While he’s in decent health and does his best to eat right and exercise, he had triple-bypass surgery three years ago.
One of these days, he will have to retire. Responsible for educating students for several decades, Post will need to call it quits. After retirement, Post hopes to return to the classroom and teach part-time. Along with teaching, he has a whole list of things he would like to do in retirement, so continuing to work and receive extra income to fund those activities is important to him. Post didn’t consult with a financial planner when thinking about retirement, so while he’s always had some sort of a plan, it has only been loosely defined. Now he wants to make sure he doesn’t outlive his retirement income, and that means working a bit longer and avoiding collecting Social Security early. Post’s situation shows why it’s best to seek professional retirement planning help early.
The baby boomer generation is famous for a lot of things. One could easily argue that people born during this era are some of the most unique individuals who have ever lived. Now, with improved health conditions, an increased standard of living and major medical advances, people are living longer than ever before. They’re also working longer than ever before. Some are working longer to keep active, others because of the benefits. But many people, Post included, are working longer to avoid using up personal retirement savings, to maximize Social Security benefits and to make sure something is left after they’re gone.
By drawing Social Security benefits early (the earliest you’re eligible is age 62), you automatically reduce the amount of benefits you’ll receive for the rest of your life. (Typically, if you delay drawing benefits past your full retirement age, you can actually increase your benefits by 8 percent for each year you wait – up to the age of 70.) So why would anyone draw early? Some people are forced to take their Social Security benefits early due to situations beyond their control. Others reach 62 and are just ready to be done working even though they don’t have any other (or very little) retirement income in place. Without a proper plan, they’re forced to collect Social Security to help pay the bills. It’s one more reason why professional advice can go a long way to helping you be independent in your retirement years.
Currently, the official retirement age varies according to the year you were born. In Post’s case, his official age to retire and receive full benefits is 66 years. He plans on waiting until then so he can collect full benefits. He also wants to keep working so he can continue to earn income and receive health care through his employer. (If you do start drawing benefits early and keep working, there are certain limits to how much money you can make each year while drawing Social Security benefits. If you go over those limits, your benefit is reduced even more.)
The longer Post can earn a steady income, the longer he can wait to collect Social Security benefits. Then when he does start drawing them, they will be increased by the added income. Post also emphasized the fun-factor in continuing to work. By working longer, his retirement savings can stay intact longer, and he’ll have more assets left for things like vacations and hobbies.
Once Post reaches his full retirement age of 66, he can work as much as he wants to with no effect on his Social Security benefits. At that point, Post says, he’ll return to the classroom and work as much or as little as his health and travel schedule will allow.
When deciding the age at which you should retire, you should always consult a financial professional. There is more to consider than the factors above. But remember, if you want to receive full Social Security benefits, it’s important to wait until your official retirement age. That can be a difficult decision for some people to make. Post says the choice to wait was an easy one for him, noting the longer he is able to travel and enjoy the great things this world has to offer, the happier he’ll be!
To see what your Social Security earnings will be at full retirement age, go to www.ssa.gov.
Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Forest Hills Financial Inc. and Securities America are separate entities. Written by Securities America for distribution by Forest Hills Financial, Inc.