The Retirement Corporation of America

When To Start Collecting Social Security

BASED ON THE latest estimates, the Social Security Administration has enough wealth on hand to stay solvent into the 2030s. By then, Congress certainly will have found ways to "feed" more money into the system. You are almost 100 percent certain to receive some Social Security benefits when you retire.

Meanwhile, in the interest of presenting the complete picture on putting your retirement funds to work, here is a refresher course in Social Security.

When You Can Start Collecting Money

Normal retirement age traditionally has been 65—the earliest age at which you could begin collecting a "normal" Social Security benefit. However, that normal retirement age crept up to 65 years and two months in 2003, and continues creeping higher until 67 becomes the normal retirement age in 2027. To help you calculate your normal retirement age, here's how it will change over the years:

Year of Birth         Normal Retirement Age
Before 1938            65
1938                      65 and 2 months
1939                      65 and 4 months
1940                      65 and 6 months
1941                      65 and 8 months
1942                      65 and 10 months
1943-1954              66
1955                      66 and 2 months
1956                      66 and 4 months
1957                      66 and 6 months
1958                      66 and 8 months
1959                      66 and 10 months
1960 and after        67

Still, you don't have to wait until your normal retirement age to draw benefits. You can start drawing them when you turn 62. If you do, however, you will only receive 80 percent of your normal retirement age benefit. The maximum your spouse can receive—if you file for a combined benefit—is 50 percent of your benefit. In other words, you get less by starting to collect benefits at 62—and so does he or she.

One drawback to collecting benefits early is that until you reach your normal retirement age, your benefit is reduced by $1 for each $2 of income beyond a fairly low threshold. There used to be a comparable penalty on income earned by those 65-69: $1 of benefits lost for each $3 of income—beyond a low threshold. That earnings penalty was repealed for those 65-69 by the Senior Citizens' Freedom to Work Act of 2000. However, it still applies to anyone 62-64 who is drawing Social Security benefits.

Furthermore, thanks to what is called the Delayed Retirement Credit, you can increase your benefit if you delay collecting it until you reach age 70. Each year you delay collecting benefits past your normal retirement age, the benefit—when you finally start collecting it—is increased by a certain amount. Here's how much the Delayed Retirement Credit can contribute to your eventual Social Security benefit.

Year of Birth          Credit Per Year
1937-38                   6.5%
1939-40                   7.0%
1941-42                   7.5%
1943 and later          8.0%

In other words, you get the biggest payoff if you can wait for Social Security until you reach 70. Furthermore, you don't have to give up Medicare if you delay claiming your Social Security benefit. Even if you decide to delay receiving Social Security benefits past your normal retirement age, you still can apply for Medicare at age 65.

For more about Social Security—including an estimate of your future benefit, contact the Social Security Administration at:

•  The Social Security website at www.ssa.gov.

•  Call 1-800-772-1213.

How to Start Collecting Benefits

Social Security benefits don't come to you automatically. You must apply for them. Contact the Social Security Administration—by telephone, by going online, or by visiting one of the 1,300 local offices—about three months before your benefits are due to begin. You and your spouse can apply for benefits individually if you each have an earnings history. But your spouse is entitled to a benefit equal to half the amount you will receive if it is higher than what he or she would receive if applying individually.

So, applying for your benefits, when the time comes, is pretty easy. You simply contact your nearest Social Security Administration office, which is located under the "United States Government" heading of your phone book. You'll need to show the Social Security worker the following items:

•  Your Social Security Card or a record of your number. If you're applying for benefits earned by someone else, you'll need that person's number or card.

•  W-2 form showing your earnings for the previous year. If you are self-employed, you'll need a copy of your most recent federal income tax return.

•  Proof of age. A birth certificate is best. If you can't locate your certificate, other documents—including baptismal certificates, school or military records, your driver's license, or voter-registration records—will probably suffice.

•  Marriage certificate. If marital status is related to your claim.

When Should You Collect Your Social Security Benefit?

•  If you aren't working, start collecting your benefit as early as possible. Your benefit won't be as large, but it would take many years of receiving full benefits to equal the extra income which those reduced benefits will generate over the years.

•  Even if you are still working, start collecting your benefit at your normal retirement age. As noted earlier, that will depend on the year you were born. You would get a bigger benefit if you waited until you were 70, but it would take a lot of years of that higher benefit to offset the money you passed up by waiting to collect.

Unless you truly believe you will make it into your 90s, there seems no clear-cut reason for delaying collecting Social Security until age 70. Instead, take it at your normal retirement age (or even 62), and invest the money until it is needed.