Social Security provides three main payments to recipients – retirement, disability and survivor benefits – with retirement payments making up roughly two-thirds of all benefits paid.

A qualified worker’s full retirement age (FRA) depends on their year of birth and can range from age 65 for those born before 1938 to age 67 for those born in 1960 or later. Qualified workers – those with at least 10 years of applicable earnings – may begin Social Security as early as age 62 regardless of their FRA. However, in taking early benefits, the worker will receive a reduced payment based on the actual number of months from their FRA to the month in which they choose to receive the early benefits. At the extreme, this amount can be up to a 30 percent reduction for those with an FRA of 67 choosing an early retirement age of 62.

In choosing an early starting date, the recipient locks themselves, and potentially their surviving spouse, into a lower benefit payment for life. If the recipient waits until FRA, they will receive 100 percent of eligible benefits. For each year of delay past FRA, they receive an 8 percent bonus up to age 70 with no additional benefit for delaying beyond age 70.

For example, Brianna was born in 1946 so her FRA is age 66. Assuming she qualifies for $1,000 per month in benefits at FRA, this would be her payment starting at age 66. However, if she chose her earliest available retirement age of 62, she would receive only $750 per month. If she were to wait until age 70 to start her benefits, her $1,000 per month at FRA would be $1,320 per month with the 8 percent bonus per year for the four years of waiting.

Of course, Brianna must make this decision based on other factors in her life. If she chooses the age 62 benefit payment, she will receive an extra 4 years of payments versus waiting until age 66 to get her full payment. This holds true for the age 66 versus age 70 scenario, as well. She must weigh the lower benefits for a longer time period with higher benefits for waiting. The break-even point for waiting is typically about 10 to 12 years; if you live longer than this, you will be better off taking a higher benefit at a later date.

There are also very complicated planning techniques for those who are married that maximize the lifetime benefit to the couple.

Assume Kim is at FRA, with a plan to wait until 70 to apply for Social Security for the higher benefits. However, at her FRA, Kim learned of a little-known Social Security quirk involving married couples. Upon reaching her FRA of 66 she applies for “spousal” benefits based on the earnings of her husband. As long as Kim is at FRA and specifies she is applying only for a spousal benefit and not for the benefits she has earned herself, she can draw a reduced spousal benefit and then at age 70 begin collecting on her own benefit with the 8 percent per year bonus for waiting until this delayed age.

This is just one of many advanced planning methods available to couples.

Life is a journey, plan for it.

Neil A. Brown is a CPA and CFP with Burkett Financial Services in West Columbia. Reach him at uscneil.com or (803) 200-2272.