People are scared.
As President Barack Obama and congressional leaders continue to fight over how to reduce the federal deficit, people are rightly concerned about what they can expect to get from Social Security. Right now, you can take an early payout at 62, but you get a reduced monthly am
ount. If you wait until your full retirement age, you get more in your monthly benefit. Wait even later, until you’re 70 when you qualify for the maximum payout, and the monthly check is even higher.
More than half of those claiming retired worker-benefits in 2009 elected to receive them as s
oon as they turned 62, according to AARP.
The budget talks have certainly made what was always a complicated decision even harder. People are increasingly asking if they should claim their Social Security as early as possible, fearing future payouts won’t be what was promised.
But since we can only deal with the now, let me suggest you try a new online calculator (www.aarp.org/socialsecuritybenefits) created by AARP. It helps estimate your benefits and then shows you the best time to claim Social Security.
Right from the start, AARP says it pays to wait. But there are situations where it’s wiser to collect early. You’ll have to enter some personal information to find out which category is best for you.
I played with the calculator using the following information:
•A 50-year-old woman.
She has a gross annual salary of $60,000 a year.
She is divorced. Her ex makes $75,000.
A married couple’s lifetime earnings are calculated independently to determine their benefits. But a spouse with a lower earnings history is eligible for spousal benefits up to 50 percent of the higher earner’s work record. In the case of divorce, if you were married at least 10 years, you can collect retirement benefits on your former spouse’s Social Security record if you are at least age 62, unmarried, and if your former spouse is entitled to or receiving benefits. The benefits you get have no effect on the amount of benefits your ex-spouse or his or her current spouse may receive.
•Her ex-spouse is a government employee. The calculator asks if you or a spouse or ex have previously been a government employee. If you didn’t pay Social Security taxes on your government earnings and you are eligible for benefits, the pension you get based on that work may reduce what you can receive. There are some exceptions, so if you’re not sure this may apply to you, check with the Social Security Administration.
One of the most important questions to answer concerns your projected monthly Social Security benefit at full retirement age. The calculator will do an estimation of your benefit, but you should take the time to go to the Social Security website (AARP says it takes about 2 minutes and it did). Social Security benefits are based on your lifetime earnings. If you select the estimated earnings option, AARP says the accuracy of the estimate will vary depending on whether you have had lapses in your employment, worked less than full-time or had significant fluctuations in your earnings history.
I selected the estimated benefit projection since I was making up everything anyway.
After entering the one page of information, I clicked on a link that said, “When should I claim Social Security?”
Not including her ex-husband’s benefits, at 62, the woman would collect $1,382 per month. At her full retirement age, which is 67, she would get an estimated benefit of $1,975. If she waits until she’s 70, she would get $2,449 a month. The calculator says to wait and collect at 70. On average, you lose about 8 percent per year if you claim Social Security early.
If you’re married or divorced, knowing when to claim becomes even more complicated. You’ll need to click on either “Does it matter if I’m married?” or “Does it matter if I’m divorced?” links. The calculator provides some tips to help you receive maximum benefits.
There are several other features on the calculator you should navigate through. For example, click on “How much of my expenses are covered?” and enter your own numbers for housing, food, transportation, etc. Just above the budget figures there’s a slider you can adjust to see what percentage of Social Security benefits will cover your basic expenses, depending on the age you select.
AARP doesn’t address every benefit situation, but it’s better than just guessing. Try it out. If there are changes made to how benefits are calculated in the budget talks, this makes the question of when to claim Social Security even more important.
Washington Post Writers Group
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