Most people know that Social Security is taken out of your paycheck every month to help cover retirement costs – but how (and when) do you actually start seeing those payments? Do you have to start collecting at a specific age? Is there an application process?
The answers aren’t one-size-fits-all. In fact, anyone between the ages of 62 and 70 can start collecting their benefits.
Today, we’re exploring the basics of Social Security benefits, including how to choose when you should start cashing in on your Social Security retirement funds.
How Does Social Security Work?
Social Security is a government program in the United States that provides financial support to eligible individuals and families, primarily in retirement, but also in cases of disability or death. The program is designed to ensure a basic level of income for people who have reached retirement age, become disabled or have lost a breadwinner.
It’s funded through a payroll tax – one you’ve likely noticed coming out of your paycheck each month. Employers also pay the tax – as of 2023, both your company and you will pay 6.2% in Social Security each pay period. Self-employed individuals will cover both sides of the tax, for a total of 12.4%.
| Social Security Benefits vs. SSI
It’s important to note that Social Security benefits are not the same thing as Supplemental Security Income, or SSI – although both are managed and distributed through the Social Security Administration. You collect Social Security benefits after you or a family member pays into the program throughout your working years, and then collect payments in or near your retirement. On the other hand, SSI is a need-based program for elderly, blind and disabled individuals with limited income and resources. SSI is not based on work history or previous Social Security payments. |
You can choose to begin receiving your Social Security benefits starting at the age of 62, and the maximum Social Security age to start collecting is 70. However, when you choose to cash in will also affect how much you’ll receive (more on that below).
Whenever you’re ready to start collecting, you can fill out an application online or request an appointment at your local Social Security office.
You will need to gather several documents, including your:
- Social Security card
- Birth certificate or other proof of age
- Proof of U.S. citizenship (if applicable)
- U.S. military service papers (if you served prior to 1968)
- Copies of your W-2 forms
This list is not exhaustive; you may be required to present additional documents upon request.
So How Much Will I Get?
Your specific payout will depend on several factors – like when you start collecting – but we can still estimate it based on a few key indicators.
For one, we know that the average Social Security payment in January of 2023 was $1,827 per month (an increase from $1,681 in 2022).
Secondly, you can look at your 35 highest-earning years of work. U.S. News reports:
“Social Security payments are calculated using the 35 highest-earning years of your career and are adjusted for inflation. If you work for more than 35 years, your lowest-earning years are dropped from the calculation, which results in a higher payment. Those who don’t work for 35 years have zeros averaged into the Social Security calculation and get smaller payments.”
The Social Security Administration offers an easy-to-use calculator as well, which you can access here.
How to look up your Social Security benefits
Once you make an online account with the Social Security Administration, you can easily view your future/current benefits, see the status of your applications and access other features.
Click here to create an account and access the Social Security Benefits Lookup.
How to find your maximum Social Security salary
The SSA writes:
“The maximum benefit depends on the age you retire. For example, if you retire at full retirement age in 2023, your maximum benefit would be $3,627. However, if you retire at age 62 in 2023, your maximum benefit would be $2,572. If you retire at age 70 in 2023, your maximum benefit would be $4,555.”
The maximum can change each year, so it’s not set in stone – what’s true for 2023 will likely look different in 2024 or 2025!
4 Factors to Consider Before Collecting Your Social Security Payments
From age to health and beyond, there are several factors to consider before applying to collect your benefits.
1. Age
One of the most significant factors influencing your Social Security benefit amount is the age at which you decide to start collecting payments. You can choose to begin receiving benefits as early as age 62, but keep in mind that this choice comes with a trade-off.
Starting early means your benefit payments will be reduced, often by a substantial amount. The SSA notes that someone turning 62 in 2023 that starts collecting would get about 30% less than if they waited until the full retirement age (which is considered 67 years old).
Essentially, waiting until later can give you higher payments.
2. Finances
Another critical consideration in the decision to collect Social Security is your immediate financial needs versus your long-term financial security. If you’re facing immediate financial challenges and require a stable source of income to support your quality of life, starting to collect benefits earlier might be a necessary choice.
However, if you have a stable income now and don’t need the money right away, waiting could optimize your total benefits.
3. Health
If you expect to live longer than the average life span, waiting to collect Social Security could prove beneficial in the long run. By delaying benefits, you’ll receive larger monthly payments throughout your retirement, which can be especially valuable as you age and face potential healthcare and living expenses.
Conversely, if your health situation is uncertain or you have a reason to believe your lifespan might be shorter than average, it could make sense to start collecting earlier.
4. Spousal benefits
For couples, Social Security planning involves considering not only your benefits, but also those of your spouse. Strategically navigating Social Security can allow you and your partner to maximize your combined benefits.
A recent article from Forbes states: “If you’re receiving Social Security payments in retirement, your spouse (or former spouse) may qualify to receive up to 50% of the amount of your benefits. These payments don’t reduce the value of your Social Security benefits in any way.”
If you’re curious about how your spouse’s benefits could affect your own (or vice versa), it’s best to connect with a financial planning expert or reach out directly to the Social Security Administration with your questions.
The decision of when to collect your Social Security payments is multifaceted and deserves careful consideration. Your age, financial situation, health and spousal status can all affect your (and sometimes your loved ones’) potential benefits. Before making any final decisions, it’s wise to consult with financial advisors or retirement planning professionals who can provide personalized guidance based on your unique needs and goals.
Plan for the Future with PrairieView Wealth
Ready to start planning your retirement income? Click here to download our free Social Security Benefits ebook and get started today.
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