When Should You Begin Taking
Social Security Payments?
Texas CPAs Break Down Social Security Payments
with Four Simple Steps

DALLAS — Choosing when to retire and start drawing Social Security benefits is an important decision, and one that is unique to each individual, according to the Texas Society of CPAs. You can begin taking payments as early as age 62, based on Social Security regulations, but when you retire will have an effect on the amount of the payment you receive.

HOW PAYMENTS ARE CALCULATED
Your Social Security benefit payments are based on your work history. In short, the more money you have earned over your career, the higher your benefits will be.

As we noted, though, the age when you retire will also have an impact. Although you are allowed to begin collecting payments at age 62, you will not yet have earned full benefits. That means that your payments will always be about 25% less than they would have been if you had waited until full retirement age.

However, early retirees will face benefit forfeitures for working while receiving benefits. If you continue to work to age 70 and beyond, you will receive more than the full benefit amount when you finally do decide to retire. Remember, too, that anyone born in 1938 or later will no longer receive full benefits if they retire at 65, which for many years was considered the official retirement age. Depending on the year when you were born, you may have to wait as late as age 67 to retire with full benefits.

AN INFORMED CHOICE
So, when’s the best time to retire? If you are a healthy person who enjoys working, it’s probably best to continue doing so as long as possible without drawing on Social Security. Sometimes, the decision to continue working might be less about choice and more about the necessity to work. If you are in poor health, it may be best to take your payments as soon as possible. (You can apply for Social Security disability benefits at any age if you are no longer able to work.) However, if you have a large retirement nest egg and don’t need the maximum Social Security benefit, you can always choose an early retirement. Whatever choice you make, don’t forget to sign up for Medicare health care coverage when you become eligible for it at age 65.

YOUR REPORT CARD
Every year, you receive a Social Security Statement that details your own earnings history and offers estimates of what your payments will be if you retire at different ages. It also discusses the disability benefits you can expect if you are severely disabled and describes the survivor’s benefits that eligible family members will receive if you die. This statement is a great tool to use as part of your overall retirement plan. You’ll find more information at the Social Security Web site at www.ssa.gov.

ONE PART OF THE PLAN
Your Social Security payments will likely replace about 40% of your pre-retirement income, according to the Social Security administration. The government also estimates that you will be able to live during retirement on about 70% to 80% of your previous income, although some advisers believe you may realistically need 100% of your pre-retirement income.

This depends on your retirement lifestyle. That means that your Social Security checks will not be enough to provide you with a comfortable retirement. In addition to any pension payments you may receive from your former employer, you should also plan to have sufficient personal savings and investments to cover your costs.

If you have questions about the best time to begin drawing Social Security payments—-or about other retirement planning issues—-be sure to consult your local CPA. He or she can help you find the answers to your family’s financial questions.

PERSONAL FINANCE INFORMATION
For additional personal finance tips, visit www.ValueYourMoney.org. While there, sign up to receive a free monthly electronic newsletter with personal finance tips on a variety of topics.

ABOUT TSCPA
TSCPA (http://www.tscpa.org) is a nonprofit, voluntary, professional organization representing Texas CPAs. The society has 20 local chapters statewide and has 28,000 members, one of the largest in-state memberships of any state CPA society in the United States. TSCPA is committed to serving the public interest with programs that advance the highest standards of ethics and practice within the CPA profession.