Reaching for their benefits before turning 65 is an option a record-breaking number of soon-to-be seniors are taking. According to a recent article from Tribune.com, 2.74 million Americans filed for Social Security in 2009. For many, the reason is as simple as it is heartbreaking. Loosing a job when nearing retirement age leaves older workers in a precarious position since employers are reluctant to hire someone they believe might be leaving the workforce for retirement within a few years. Still, there are as many reasons to continue the job search and to take social security benefits as there are to take early retirement.
Chief among the reasons to wait is the reduction of benefits. The steep penalty, for receiving benefits checks before reaching normal retirement age varies with the age by month you opt for retirement. Benefits are reduced by five-ninths of 1% for every month the retiree is short of turning retirement age. This 1% deduction only allows for 36 months. For anyone who is more than 36 months away from hitting the true retirement age a further deduction of five-twelfths of 1% per month is added on further reducing the full benefit of retirement. Another good reason to wait for benefits is seniors get credit for delaying retirement past the normal retirement age. This credit can add up, and translate to a slightly bigger benefit check per month.
On the Maximize your Social Security Page, the advice from the AARP is more specific as to who should and should not opt for early benefits and it boils down to the difference between marital status and gender. Women tend to live longer therefore single women should hold off as long as possible for retirement, as they are more likely to see the benefits of higher payments once they do retire. Single men on the other hand do not have this extended life expectancy. Among single men, those with a family history indicating a shorter life expectancy or a known predisposition to an illness should consider claiming as early as possible. The advice for married couples in which the wife has a shorter job history than the husband is for her to take early retirement. The husband should then hold off filing for benefits. An important tip to remember here is that if either the husband or wife dies the survivor can file a claim for the spouse’s social security benefits.
For some older workers taking early social security benefits can be a matter of survival, but there are some negatives to hold in mind before filing. Benefits can be reduced even more by taxes and Medicare premiums. You can also lose more money from you full benefit if you are going to working at a full-time or part-time job. Any amount over $14,160 will reduce social security benefits by $1 for every $2 above this mark. This is offset by the fact that once you reach retirement age you will see an increase in benefits reflecting the amount withheld during the period you worked.
This is not a decision anyone should make lightly or without considerable thought. Weighing factors carefully with a thoughtful eye to the future people need to make the best choice for the circumstances in which they find themselves.