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Optimizing your Social Security Benefits 

Explaining your options so you can make educated decisions

Know your options...

Social Security benefits can be used to help with expenses during retirement, but many people are confused when they start looking at the plan details. There isn’t a black-and-white payout schedule for individuals, which means that you have the opportunity to choose when you want to start receiving these benefits. .

For most retired Americans, Social Security represents a substantial portion of their retirement income. According to the Social Security Administration, nine out of 10 of all Americans over the age of 65 receive some form of Social Security. For 50 percent of retired couples, Social Security accounts for more than 50 percent of the total household income. 

Social Security offers a number of calculators to help you estimate your benefit in retirement. Your benefit is based on a number of factors, including how much you earned over the course of your lifetime and something called your Full Retirement Age (FRA). Your FRA is the age at which you can receive full Social Security retirement benefits.

Your FRA depends on your date of birth. If you were born between 1937 and 1955, your FRA is 66. If you were born in 1960 or later, your FRA is age 67. If you were born between 1954 and 1960, your FRA is 66 plus two months for every year after 1954 that you were born.

However, there’s nothing saying that you have to take benefits at your FRA. In fact, you can start taking benefits as early as age 62. Keep in mind, though, that your benefits will be reduced if you take benefits early. In fact, if you take benefits at 62 and your FRA is 67, your annual benefits could be reduced as much as 30 percent. The reduction is smaller the closer you are to your FRA.

These reductions are also permanent. For example, if your benefit is reduced by 30 percent because you took benefits at age 62, the payment won’t jump up to the full amount when you reach your FRA. You will continue to get the reduced benefit amount. Another option is to delay your Social Security retirement benefits past your FRA. The advantage to doing this is that you will increase your annual payment once you start receiving benefits. As long as you were born after 1943, you can receive an annual eight percent increase in payments for each year that you delay benefits past your FRA.

You can delay the benefits to a maximum age of 70. If your FRA is 66, that means you can delay benefits for up to four years, which equals a permanent 32 percent increase in annual payments.

There’s no right or wrong decision when it comes to taking Social Security payments. The decision on when to file for benefits should be based on your specific needs and goals. However, the more you can receive from Social Security, the less you may have to rely on personal savings.