If you’re turning 67 next month and considering when to start collecting Social Security benefits, it’s important to carefully weigh the long-term impact of your decision.
Once you claim Social Security, your benefit amount is typically locked in for life, apart from annual cost-of-living adjustments (COLAs).
If you claim before your Full Retirement Age (FRA), your benefit will be permanently reduced.
If you wait until FRA, you’ll receive 100% of your benefit, and waiting until age 70 allows you to maximize it at 132% of your FRA benefit.
Since you’re already at FRA, you won’t face deductions for earning income while collecting benefits, unlike those who claim early and may have $1 for every $2 withheld after a certain income limit.
Also, working while collecting Social Security could increase your benefit since the Social Security Administration adjusts benefits annually based on your highest earning years.
However, delaying benefits beyond FRA increases your monthly payment by about 8% each year until age 70, which isn’t tied to the COLA.
You should also consider the tax implications — if your combined income (adjusted gross income + nontaxable interest + half of your Social Security benefits) exceeds certain limits, up to 85% of your benefits may be taxable.
For joint filers, that threshold is $32,000 to $44,000, and above $44,000, up to 85% of benefits are taxable.
High income could also increase your Medicare premiums through the Income-Related Monthly Adjustment Amount (IRMAA), which is based on your modified adjusted gross income from two years earlier.
Before filing for benefits, ask yourself why you want to claim now. If you need the money, claiming might make sense.
If you expect to live longer, delaying could mean a higher lifetime payout.
Ultimately, the right time to claim is when it best fits your personal and financial situation.
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