Q. Do you have a formula to help my wife and I determine when is the best time to start collecting SS benefits?
A. Timing of retirement is a very personal decision. What is important is that it is an informed decision. Early retirement reductions and delayed retirement credits are roughly actuarially fair. That is, over an average lifetime the same value in Social Security dollars is paid whether benefits begin at 62, 70 or any month in between. In making your decision as to when to begin a Social Security benefit, you should consider the Social Security dollars you will need in combination with anticipated retirement income from other savings and assets.
An important consideration is whether it is important to you to maximize the amount of your Social Security benefit, especially later in life. For example, if you start receiving your benefits at age 62 and your full retirement age is 66, your benefit will be 25 percent less than what you would receive if you waited until FRA. And if you wait until you are 70, your benefit will be 32 percent greater than you would receive at age 66.
Another consideration is whether you are single, married or widowed. The survivor of a married couple receives whichever of their two benefits is the larger (reduced if the survivor benefit begins before full retirement age).
In determining a benefit, Social Security law assumes a 35-year earnings history. When an application for benefits is filed, old earnings are indexed to bring them up to date before the highest 35 years of earnings are selected. Excess lower earning years are disregarded. Zero years are included in the calculation if the wage earner has fewer than 35 years of earnings. Replacing zero years by continuing in the work force can significantly raise a future monthly benefit.
If you do not have a current benefit estimate from the Social Security Administration, you can determine your own benefit on line at the Social Security Administration’s new benefit Retirement Estimator web site. The web site is http://www.socialsecurity.gov/estimator/index.htm .