November 27, 2013
If you’re nearing the customary retirement age of 65, you may be considering when to apply for Medicare and Social Security benefits. This is an important decision that can have significant impact on your financial situation down the road, so it is important to understand how these benefit programs work. In particular, if you are not planning to retire at the full retirement age (FRA) of 65 you should be aware that you are not obligated to apply for Social Security even if you opt-in to Medicare coverage when you are eligible. In fact, doing so can have negative financial consequences down the road.
If you are planning to apply for Medicare benefits soon, make sure you consider whether you would be better off applying for Social Security benefits later, taking into consideration your planned retirement age, your expected income (if you earn more than $15,120 a year when receiving social security you will be subject to the earnings penalty, under which one dollar of Social Security retirement benefits is withheld for benefits before FRA), and, if you are married, the spousal benefit. In many cases, if you plan to work beyond your FRA, delaying your Social Security benefits can mean a bigger payout later on.
Because Social Security retirement benefits are based on lifetime earnings, the size of the retirement benefit check that you collect will depend on your age when you apply for them. If you choose to receive benefits at the earliest retirement age of 62, you will receive less than what you would receive if you wait until 65. And, if you delay your Social Security benefits up to age 70, you will receive a Delayed Retirement Credit (a percentage increase in retirement benefits for each year beyond FRA that you do not take them).
There are several important factors to consider when deciding the best time to take Social Security benefits. If you need assistance determining what the right choice is for you from a financial perspective, please contact our office.