50+ Lifestyles

Retire from Social Security at age 62? 65? 67? Or 70?

By Richard J. Schillig, CLU, ChFC, LUTCF
Independent Insurance and Financial Advisor

Even if you’re going to live comfortably in retirement no matter what Social Security benefits are waiting for you, you have contributed to the system for decades. You deserve the best possible return on those healthy contributions. For some retirees delaying social security payments until you reach your full or maximum social security benefit provides the best return. Let’s look at an example. At age 62 Bob is healthy, happy and productively working at an annual salary of $80,000. If Bob begins receiving Social Security retirement at age 62 he will receive 30 percent less than full retirement would have been. And this reduced benefit will be received for a lifetime. Bob’s full retirement is age 67. He earlier planned on drawing Social Security at age 65 – that would still give him about 13 percent less – for a lifetime. Full retirement at age 67 will provide no reduction in Social Security benefits – for a lifetime. Further postponing Social Security until age 70 will allow 8 percent more per year – for a lifetime. Let’s look at some numbers at age 62 early retirement Bob would receive $964, at age 65 $1,198, at age 67 $1,300, at age 70 $1,698. Readers – if you were Bob – what monthly income would you prefer? Of course, the age 70 income is the greatest. That’s what most of us would want. But waiting to age 70 may not be the most desirable choice.

An alternative approach to provide an early retirement from and still be eligible for the maximum Social Security benefit is for Bob to purchase an annuity with some of his retirement savings (IRA(s), 401K, 403b, 457 or other savings). This may be accomplished through in-service rollovers or other transfers. Bob then continues to work and continues to pay into Social Security. Postponing Social Security to age 65 will provide a 13 percent reduction from full benefits – a significant increase over the 30 percent reduction at 62. Why consider age 65 retirement? Medicare eligibility begins at age 65. Some retirees may want to coordinate Medicare eligibility with Social Security retirement. At this point, if Bob starts drawing income from his annuity that may help to offset the income Social Security would have provided until eligible for full Social Security Retirement.

Age 67 is Bob’s full retirement age. He is no longer penalized if he starts drawing monthly social security income. But with his annuity income, Bob could perhaps further postpone Social Security income to age 70 and pick up that 8 percent additional annual income for a lifetime. For every month he delays retirement beyond full retirement age, up to his 70th birthday, Bob earns a higher Social Security monthly benefit.

But wait a minute – what about that early retirement? Is early retirement still possible? Annuities – especially the fixed index annuity properly arranged may allow additional increased monthly income from Social Security by postponing the beginning date. All of us have been contributing to the Social Security System for decades. We deserve the best possible return on these contributions. Delaying Social Security payments until you reach your maximum age is the strategy providing the greatest monthly income. Careful planning with a financial professional knowledgeable with annuities may help to maximize these Social Security payments.

Fixed index annuities pay a generous initial bonus and guarantee account values do not decline with stock market declines. These financial products are offered by life insurance companies. Annuities properly arranged may supplement income for an early retirement allowing social security to continue to grow.

What age is retirement from Social Security best for you? Let’s discuss your individual situation to determine the best age for retirement.

During this month of July, we continue our Community Meetings reviewing the basics of Medicare and the multiple options available. See our ad this page. Call for a reservation.

Richard J. Schillig, CLU, ChFC, LUTCF is an Independent Insurance and Financial Advisor with RJS and Associates, Inc. He can be reached at (563) 332-2200.