| By :
Shane Flait
Social Security pays you a monthly income that's annually adjusted to the cost of living (COLA) until you die. But Social Security permanently increases your benefits the longer you delay beginning them. But that poses the problem of when its best for you to begin them. And that's what this article addresses. First off, Social Security pays you a monthly benefit based on your 35 highest-earning years. That benefit determines how much you'll be paid monthly when you reach your full retirement age (FRA). Everyone's FRA was originally 65, but it's adjusted slightly upward for those born later. For most boomers, it's 66. If you choose to begin receiving benefits earlier than your FRA, your monthly benefit is permanently decreased from your FRA benefit. If you choose to begin at age 62, you lose about 25% of your FRA benefits. Beginning between 62 and your FRA gives a proportionally intermediate decrease. If you choose to wait beyond your FRA, Social Security will increase your FRA benefit by about 8% per year until you reach age 70. So, delaying until you reach age 70 will increase your FRA benefit by about 32%. Remember, all these benefit changes are aside from the yearly COLA. Breakeven Age for Social Security Benefits Since you only receive your Social Security income while you're alive, and delaying your benefit increases your monthly income, you might ask 'when should I start my benefits to receive the most Social Security money before I die.' That'd be easy to figure out if you know when you'll die - which we don't! But here's how you can make a guesstimate of when you should begin. First, Social Security has arranged for the change in its monthly paid benefit for delaying the start of anyone's benefits, to give roughly the same amount of total payout if everyone dies at about age 81. So 81 is an approximate breakeven age for everyone. This age approximately corresponds to the remaining life expectancy of anyone reaching age 65. So, no matter when you start your benefits, you'll have received the same total amount at age 81. That means that if you live longer than 81, you'll receive more for having delayed longer, since your 'delayed' monthly benefit is higher. But it also means that if you die before age 81, you'll have received more for having started earlier despite a lower monthly benefit. Choosing the best age for you to begin Though 81 is an approximate statistical breakeven age for everyone, your own remaining life expectancy is a real guess. Nevertheless, if your state of health makes you a poor candidate for reaching 81, you probably should begin your Social Security early. Single men have a lower life expectancy then others; so many should consider taking their Social Security early. On the other hand single women tend to live longer than men. Unless they have life-shortening health problems, they may benefit more by delaying their Social Security benefits. Those that are married can play it both ways - and here's how. Married men typically live longer than single men. And of course women tend to live longer than men. Also at the husband's death, the surviving wife is eligible for 100% of his benefits - and vice versa. Aside from any specific health problems to the contrary and assuming the husband was the higher earner, then assume he'll die before the wife. For that scenario the wife should take her benefits as early as possible, while the husband delays at least to his FRA. When he dies, she'll receiver his FRA benefits. Hopefully this clears up the general trend to how things work.
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